The Accelerating Decline in House Prices in the UK: Implications and Insights
House prices in the UK plummeted by 5.3%, sparking concerns over property affordability. Get insights into this decline and its impact on the London market. Learn more.
House prices in the UK plummeted by 5.3%, sparking concerns over property affordability. (PHOTO: iSTOCK)
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Factors Driving the Accelerated Decline in House Prices in the UK
The decline in house prices in the UK has accelerated significantly, reaching its fastest pace since June 2009, according to the latest data released. Figures from lender Nationwide reveal that the average cost of a home dropped by a larger-than-expected 5.3% to £259,153 in the last month, compared to its peak in August 2022. This marks a substantial year-on-year rate of decline, which had been at 3.8% in July. The drop in demand for homes, particularly among buyers requiring substantial mortgages, has been attributed to the impact of higher interest rates, making affordability a significant concern. Mortgage approvals have also been approximately 20% below pre-pandemic levels in recent months.
According to a published article in Evening Standard, Robert Gardner, Chief Economist at Nationwide, remains cautiously optimistic, suggesting that a relatively soft landing in the house prices in the UK is still possible, assuming that the overall economic circumstances match anticipated conditions. He pointed out that cash purchases have remained resilient, but mortgage-based transactions have slowed more noticeably. However, Kundan Bhaduri, director of property developer The Kushman Group, voiced concern, warning of a potential 20% drop in house prices in the UK if mortgage rates remain high. Bhaduri highlighted the nearly one million fixed-rate mortgages, including 100,000 in London, needing refinancing by year-end as a major concern.
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The Looming Crisis for London Landlords and Its Potential Impact on House Prices in the UK
Mortgage experts are also sounding alarms about a potential “mass exodus” of London landlords, which could further depress prices. Data reveals that landlords renewing buy-to-let mortgages in London this winter could see an average annual increase of £6,384 in their expenses. Even if landlords switch to the best available rates, their monthly payments could nearly double due to average rates rising from 2.24% to 5.42%. Craig Fish, director of broker Lodestone Mortgages & Protection, anticipates a significant shift in the buy-to-let landscape, spelling the end for accidental and small landlords, with a substantial impact on house prices in the UK and the southeast expected in the coming months.
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