Housing surveyors have recorded the biggest fall in new buyer inquiries in October since the financial crisis, excluding the Covid-19 lockdown period.
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LONDON – UK house prices fell for the first time in nine months in December as the country's budget and higher mortgage rates dampened a recent surge in homebuying activity.
Average property prices fell 0.2% between November and December – the first monthly decline since March – new data from the Halifax lender showed on Tuesday. That's less than the 0.4% forecast by economists polled by Reuters.
This means the average property value in the country has fallen slightly to £297,166 ($372,560).
House prices rose 3.3% in December from a year earlier, but annual price growth also fell from 4.7% in November and below the 4.2% expected by economists.
Shares of British house builders Taylor Wimpey, Persimmon, Belfry AND Barratt Redrow all dropped after the data was released on Tuesday morning.
UK house prices rose at a steady pace in 2024, rising for five consecutive months after a short period of stagnation as sentiment improved following the UK elections and the launch of the Bank of England cycle of interest rate cuts.
However, a cooling interest rate expectations — including on the back of the government Tax and expenditure budgetwhich resulted in rising borrowing costs in the UK, which put pressure on deals towards the end of the year.
Halifax mortgage director Amanda Bryden said higher mortgage rates are likely to continue to impact the market in 2025, even if price increases remain “modest”.
“Mortgage affordability will remain a challenge for many, especially as bank rates are likely to fall more slowly than previously anticipated,” Bryden said.
The second crack in the housing market
According to data published by the Bank of England on Friday, the fall in house prices comes after the number of mortgage approvals in November came in below expectations and fell below the level recorded in October.
Tom Bill, head of UK housing research at Knight Frank, said the combined prints showed the housing market had started to see volatility after the government's October 30 budget cast doubt on the country's stability. economic prospects.
“There will inevitably be some slowdown due to the fact that borrowing costs have gone up,” Bill told CNBC's “Street Signs Europe.”
Analysts now expect the number of transactions to increase in the first months of this year as upcoming changes to a key homebuyer tax motivate buyers and sellers.
The government announced the end of the pandemic-era land tax cut in its budget, which means that from April 1, buyers will have to bear higher transaction costs.
“Stamp duty changes are undoubtedly a key driver of demand at the moment, supporting property values,” said Stephen Perkins, managing director at Yellow Brick Mortgages.
However, Bill noted that this increase in transaction volume would likely be short-lived and expected a lull from the second quarter.
“To some extent, the clock is ticking,” he said.
Following the budget, Knight Frank revised its UK property price growth forecasts in November. It now expects average property prices to increase by 2.5% in 2025 and 3% in 2026, up from 3% and 4%, respectively, forecast in August.