The average UK house price fell in August at the sharpest annual rate seen in 14 years, according to an index.
House prices fell by 5.3% annually in August, taking the average property value to £259,153, Nationwide Building Society said, marking the biggest annual percentage drop since July 2009. Property values fell by 0.8% month-on-month in August 2023.
Nationwide said house prices are now 5.3%, or around £14,600, typically below their August 2022 peak.
Robert Gardner, Nationwide’s chief economist, said, “August saw a further softening in the annual rate of house price growth to minus 5.3%, from minus 3.8% in July, the weakest rate since July 2009.”
He said 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. For example, mortgage approvals have been around 20% below the 2019 average in recent months and mortgage application data suggests the weakness has been maintained more recently. A “relatively soft landing is still achievable”, providing broader economic conditions evolve in line with expectations. In particular, unemployment is expected to remain low and the vast majority of existing borrowers should be able to weather the impact of higher borrowing costs given the high proportion on fixed rates, and where affordability testing should ensure that those needing to refinance can afford the higher payments. While activity is likely to remain subdued in the near term, healthy rates of nominal income growth, together with modestly lower house prices, should help to improve housing affordability over time, especially if mortgage rates moderate once (the Bank of England base rate) peaks.”
Property purchases using cash have been “remarkably resilient, while purchases involving a mortgage have slowed much more sharply. Home-mover completions with a mortgage in the first half of 2023 were a third (33%) lower than 2019 levels, while first-time buyer numbers were around 25% lower. Buy-to-let purchases involving a mortgage were nearly 30% down. By contrast, cash purchases were up by 2%.
