"With the largest annual decline in house prices since the depths of the financial crisis, homeowners may be worried about what this means for them"
All regions saw a slowing in price growth in Q1, with most seeing small year-on-year falls
Robert Gardner, Nationwide's Chief Economist, comments on this morning's data: “March saw a further decline in annual house price growth, with prices down 3.1% compared with the same month last year. March also saw a further monthly price fall (-0.8%) – the seventh in a row – which leaves prices 4.6% below their August peak (after taking account of seasonal effects).
“The housing market reached a turning point last year as a result of the financial market turbulence which followed the mini-Budget. Since then, activity has remained subdued – the number of mortgages approved for house purchase remained weak at 43,500 cases in February, almost 40% below the level prevailing a year ago
“It will be hard for the market to regain much momentum in the near term since consumer confidence remains weak and household budgets remain under pressure from high inflation. Housing affordability also remains stretched, where mortgage rates remain well above the lows prevailing at this point last year."
House price growth slowed in all UK regions
Nine out of 13 regions saw annual house prices fall during Q1, with Scotland recording the weakest performance where prices were down 3.1% compared to a year ago, a very different picture from the 3.3% year-on-year rise seen in the previous quarter.
East Anglia, which was the strongest-performing region last quarter, saw a significant slowdown, with prices falling 1.8% year-on-year, making it the weakest-performing English region. The neighbouring Outer South East saw a 1.5% year-on-year decline, while London saw a 1.4% fall.
Strongest region
The West Midlands was the strongest performing region, with prices up 1.4% compared with a year ago. Across northern England overall (which comprises North, North West, Yorkshire & The Humber, East Midlands and West Midlands), prices were flat compared with Q1 2022. Meanwhile southern England (South West, Outer South East, Outer Metropolitan, London and East Anglia) saw a 1.1% decline.
Northern Ireland saw a noticeable slowing in annual house price growth, although prices were still up 1.3% year-on-year. Meanwhile, in Wales, annual house price growth slowed from 4.5% to -0.7%.”
Tom Bill, head of UK residential research at Knight Frank, said: “The reverberations from the mini-Budget that shook the UK housing market won’t disappear overnight. After effectively shutting down for Christmas in September, the property market turned back on in January as stability returned to Westminster and the mortgage market. Activity has been solid this year as buyers accept the new normal for mortgage rates.
"For anyone with memories that stretch further back than 2008, it looks very much like the old normal. That said, more financial pain will enter the system as owners move onto higher fixed-rate deals and combined with an increase in supply from the lows of the pandemic, we expect UK prices to fall by a few percent this year.”
Nathan Emerson, CEO of Propertymark, said: “Our member agents are reporting transaction levels year on year to be stable and listings of new properties coming to the market also being steady.
"With a stream of serious buyers still keen to move, and prices still higher compared to this time last year, sellers are still in a strong position to sell, however, they can no longer test the market at higher prices and align with those achieved last year. Instead, they will need to reduce or be open to offers in order to get a more realistic and efficient sale.”
Iain McKenzie, CEO of The Guild of Property Professionals, says: “With the largest annual decline in house prices since the depths of the financial crisis, homeowners may be worried about what this means for them.
“Unlike the financial crisis, we haven’t seen an aggressive drop-off in transactions, so the slowdown in prices has hardly been the crash that was expected. Sellers are becoming more open to negotiating with buyers on the asking price and that has the potential to skew the data.
“While we are forecasting an overall decrease of around 8% this year, this would only bring house prices in line with levels back in 2021.
“Confidence is returning to the property market following the fallout of the mini-Budget last September and we should expect further improvements, so long as inflation is brought under control this year.
“First-time buyers are being reassured by lenders, as the number of mortgage approvals recently saw the first monthly increase since August last year.
“The high cost of living remains the greatest barrier to home ownership in this country. Inflation levels continue to squeeze households and prospective buyers will need to tighten their purse strings even tighter from next month, as government support on energy bills is withdrawn.”
Tomer Aboody, director of property lender MT Finance, says: "With the Kwarteng Budget and macro-economic climate affecting interest rates and inflation, low confidence in the housing market was inevitable.
"Buyers and sellers paused or withdrew from purchases as rates soared. With a combination of the higher cost of living and in some cases rates at four or five times what they had been, it wasn’t surprising that there was out-and-out panic.
"As we are now seeing more stability in Swap rates, which is leading to more confidence, the market is hopeful of a better second quarter."
