Annual average house price growth has turned negative for the first time since June 2020, with February prices down 1.1 per cent compared to last year.
The latest Nationwide house price index, released today (March 1), showed that average house prices have seen a monthly fall of 0.5 per cent.
The average house price in the UK during February sat at £257,406, down from £258,297 in January.
This was the sixth monthly fall in a row, with prices 3.7 per cent below their August peak after taking account of seasonal effects.
Nationwide chief economist, Robert Gardner noted that the recent slow down of house price data began with the financial market fallout after September’s “mini” Budget.
“While financial market conditions normalised some time ago, housing market activity has remained subdued,” Gardner said.
“This likely reflects the lingering impact on confidence as well as the cumulative impact of the financial pressures that have been weighing on households for some time.
“Indeed, inflation has continued to outpace wage growth and mortgage rates remain significantly higher than the lows recorded in 2021.”
Gardner also noted that even though consumer sentiment has improved in recent months, it is still at a level that prevailed during the depths of the great financial crisis.
No respite for first-time buyers
Looking ahead, Gardner believes the market will remain subdued in the near future as economic conditions remain tough and mortgage rates remain higher than in recent years.
“Despite the modest fall in house prices, for a prospective first-time buyer earning the average income looking to buy the typical home, mortgage payments remain well above the long run average as a share of take-home pay,” Gardner said.
“In addition, deposit requirements remain prohibitively high for many and saving for a deposit remains a struggle given the rising cost of living, especially for those in the private rented sector, where rents have been rising strongly.”
Despite these challenges, Gardner said conditions should gradually improve if inflation declines further in the coming months as expected.
“Solid gains in nominal incomes together with weak or declining house prices will also support housing affordability, especially if mortgage rates edge lower in the coming months,” he added.
Commenting on the Nationwide data, experts said the slowdown in February is “unsurprising”.
Nicky Stevenson, managing director at national estate agent Fine & Country, said spring will be a “critical bellwether” for how the housing market is performing during this period of high inflation and economic insecurity.
“A slowdown in prices in February is not unsurprising given normal seasonal trends, but spring is traditionally busy and we are seeing an increasing number of buyers are being enticed back to the market,” Stevenson said.
“Data released earlier this week showed the average house price has risen by 20 per cent since the start of 2020, representing a £50,000 rise — an astonishing increase compared to the 7.8 per cent increase in the three years prior.
“A slowdown in price growth is therefore playing a part in drawing prospective buyers back to the market, as they are keen to try to secure a good deal on their next home.”
Rohit Kohli, operations director at Romsey-based mortgage broker The Mortgage Stop, noted that although demand is lower than this time last year, it is in line with pre-pandemic levels.
“People are far more patient and not in as much of a rush to buy. They are also no longer offering significant amounts over the asking price, and properties are taking a couple of weeks to sell rather than days, much more in line with the norm,” he explained.
“Prices haven’t reduced too much, but there is certainly less overpaying. Some sellers are not being realistic about the asking price but expect their onward purchase to be lower in price, which doesn’t make sense.”
Kohli added: “Despite nervousness around the base rate, buyer confidence is being lifted, and we are seeing more enquiries for residential purchases.”
jane.matthews@ft.com
