The cost of homes in August fell at the fastest rate since 2009, a survey has found
The downturn in the British real estate market has accelerated as home prices in August fell at their sharpest annual rate since the global financial crisis, mortgage lender Nationwide revealed on Friday.
Housing prices slumped by 5.3% in August in what turned out to be the steepest annual drop since July 2009. This has been driven by soaring mortgage costs, which reduced demand from buyers, the lender said. In August alone prices fell by 0.8%, bringing the average property value down to £259,153 ($329,000) or around £14,600 ($18,500) below their peak in August 2022.
“The softening is not surprising given the extent of the rise in borrowing costs in recent months, which has resulted in activity in the housing market running well below pre-pandemic levels,” said Robert Gardner, the chief economist at Nationwide.
Residential home prices peaked in August of last year following the pandemic, lifted by greater demand, previously low interest rates, and temporary tax incentives. However, they have dropped sharply since then as soaring rates added pressure on UK households already struggling with the cost-of-living crisis.
“We think the August data marks the start of a significant further drop in house prices,” Andrew Wishart, senior property economist at Capital Economics, said.
This comes as home sales in the UK are set to fall to their lowest level since 2012 as a result of surging mortgage costs. Sales are expected to drop by 21% year-on-year to about 1 million this year, according to recent data from the real estate firm Zoopla.
“Constant interest rate rises are making affordability difficult for buyers who are trying to move, with many having little option but to wait until rates settle,” said Tomer Aboody, a director of the property lender MT Finance.
The Nationwide report also showed a sharp slowdown in the volume of home sales. A measure of housing transactions completed fell almost 20% below 2019 levels and 40% below the level recorded in the first half of 2021.
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September 02, 2023 at 11:31AM