"Concerns linger about the extended period of higher interest rates"
UK house prices took a slight dip of 0.1% in the year leading up to September 2023, a shift from the previously revised increase of 0.8% in the 12 months prior to August 2023, according to Halifax.
The average house price in the UK for September 2023 held steady at £291,000, showing minimal change from a year ago but remaining above the low point observed in March 2023.
Karen Noye (pictured), mortgage expert at Quilter, said UK house prices have experienced a 0.5% decline since August, contributing to an annual drop of 0.1%, bringing the average property value to £291,000.
“Despite the silver lining of lower inflation, concerns linger about the extended period of higher interest rates, potentially prolonging a slump in buyer demand,” she commented.
This market downturn, Noye added, is exacerbated by a current reluctance among sellers to list their properties, maintaining limited housing stock and preventing any substantial price crashes.
The impending expiration of fixed-rate mortgage deals, she stated, adds an element of uncertainty, as more properties may be pushed onto the market.
Noye pointed out that a potential surge in listings during a time of restrained demand threatens to temper the exuberance of what has been a turbocharged real estate market in recent years.
“Optimism lies in the anticipation that, as the Bank of England gains confidence to initiate interest rate reductions, we may witness a revival of confidence in the property market; the dynamics of the real estate landscape are intricately tied to these economic factors,” she said.
Meanwhile, Noye said the rental market remains remarkably tight, serving as a stabilising force by sustaining demand in the face of broader market challenges.
“This delicate balance between supply, demand, and economic indicators will likely shape the trajectory of the UK property market in the foreseeable future,” she noted.
Meanwhile, Jonathan Hopper, chief executive of Garrington Property Finders, commented that the property market appears to be undergoing a significant shift, with official figures finally reflecting months of price cuts.
“A modest 0.1% dip in average house prices over the past 12 months signifies the first annual retreat in more than a decade, a stark contrast to the soaring 13.8% seen just last summer,” he stated.
While upcoming data might unveil further declines, Hopper said there is a palpable sense that the prolonged shadows cast over the property market are gradually lifting.
The recent substantial drop in Consumer Price Inflation, he said, has injected a much-needed positive sentiment.
“Major housebuilder stocks have surged as markets anticipate a quicker-than-expected reduction in interest rates,” Hopper declared.
Despite mortgage rates still being relatively high compared to the past decade, he said that recent cuts and an emerging price war among lenders are poised to enhance the overall fluidity of the market.
“The primary casualty of this market correction has been the decline in home sales, with September transactions witnessing a 17% drop compared to the same period last year,” he said.
However, Hopper predicted that the easing of interest rates is anticipated to draw more potential buyers into the market.
With inflation showing a significant cool-down, Hopper said, disposable income is on the rise, likely nudging up demand in the coming months.
“Even as buyers exercise caution regarding price risks and borrowing costs, the market seems poised for a gradual recovery,” he concluded.
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