House prices experience largest annual fall in 14 years

The index explained that the average house price has decreased to £279,569, back to the level seen in early 2022, from the £284,852 recorded in July.

August’s average house price also represented a fall of around £14,000 from the same time in 2022.

The UK housing market is currently at risk of a crash finder.com deputy editor and mortgage expert, Kate Steere

It was also found that property prices dropped by 4.6 per cent on an annual basis in August, a change from the annual decline of 2.5 per cent recorded in July.

August also recorded a quarterly decrease of 1.2 per cent.

However, the index specified that prices were at a recorded peak last summer.

Myron Jobson, senior personal finance analyst at Interactive Investor, said: “The biggest annual fall in house prices in 14 years is not enough to make many would-be buyers feel optimistic about their prospects as affordability remains burdensome.

“Halifax and Nationwide are singing from the same hymn sheet this month when it comes to house prices. Both have reported the largest annual drop in house prices since 2009 last month, although down from record high property prices last summer, with higher borrowing costs resulting in a slowdown in activity in the housing market.

“The housing market is in a tough spot, with the affordability squeeze from high mortgage rates and broader cost of living pressures remaining a persistent challenge for would-be buyers."

He explained that while mortgage rates have ticked lower in recent weeks, they are likely to remain lofty in the near term, with interest rates set to remain elevated in a bid to rein in stubbornly high inflation.

"As such, buyers will have little option but to buckle down and figure out how to make the numbers work in the new era of high mortgage rates," he said. 

“For buyers, finding affordable options remains difficult. Although house prices have waned from a record peak last summer, they still remain around £40,000 higher than pre-pandemic levels. And with fewer homeowners poised to become sellers this year as not to give up the super low-rate mortgage they secured before rates skyrocketed, buyers have a tough road ahead."

Meanwhile, Halifax Mortgages director, Kim Kinnaird, said: “It’s fair to say that house prices have proven more resilient than expected so far this year, despite higher interest rates weighing on buyer demand.”

However, she too warned there is “always a lag-effect” for rate increases, and there may be a “greater impact” from higher mortgage costs flowing through to house prices.

“Increased volatility month-to-month is also to be expected when activity levels are lower, though overall the pace of decline remains in line with our outlook for the year as a whole,” she added.

However, the update was received negatively by finder.com deputy editor and mortgage expert, Kate Steere, who said: “It’s extremely concerning to see another significant decline in house prices during August. 

“The UK housing market is currently at risk of a crash, and with another base rate hike largely expected at the end of this month, house prices are set to take another hit.”

Regional differences

The index also found that all UK nations and the nine English regions registered a decline in house prices over the last year, especially in the north.

The region that experienced the biggest drop was the south east with house prices falling by 5 per cent to an average of £379,565.

The index attributed this fall to buyers needing to find larger deposits and fund larger monthly repayments.

Wales, which recorded some of the biggest gains in property prices during the pandemic-driven race for space, saw property prices fall by 4.7 per cent over the last year.

The slowest pace of decline was recorded in Scotland where property prices fell by 0.6 per cent points to an average price of £201,932.

London remained the most expensive region in the UK to purchase a home, with an average property price of £529,814.

However with prices down by 4.1 per cent over the last year, London saw the biggest fall of any region in cash terms (a fall of £22,777).

tom.dunstan@ft.com

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