House prices have slumped by 3.8 per cent year on year, the latest closely watched figures from Nationwide show, as a season of high interest rates and weak consumer confidence continues to batter the market.
The figure is the weakest since July 2009, although it is only slightly lower than the -3.5 per cent recorded last month.
According to the High Street building society the average price of a home now costs £260k down from £262k compared to last month.
It comes amid a challenging period for the housing market which has been battling high mortgage rates every since the central bank hiked interest rates for a 13th consecutive time.
While some High Street lenders were beginning last week to reduce the cost of their deals, it has been predicted that the Bank of England will raise rates again in efforts to fight inflation.
Higher borrowing costs have knocked sentiment and forced buyers to recalculate their budgets but the property market hasn’t slammed on the brakes,” Tom Bill, head of UK residential research at Knight Frank, said.
“The bank rate is nearing its peak, which means that while sentiment will remain subdued, it will only improve in the second half of this year. That said, prices and sales volumes will come under pressure as the market descends from the highs of the pandemic and adjusts to the new lending environment.”
He added: “While we expect UK prices to fall by 5 per cent this year, demand should prove more resilient than expected between now and the general election given the cushioning effect of wage growth, high levels of housing equity, lockdown savings, the availability of longer mortgage terms, forbearance from lenders and the popularity of fixed-rate deals in recent years.”
Jonathan Hopper, CEO of Garrington Property Finders, said: “Last summer’s property boom is as forgotten as its tan lines.
“The steam has almost entirely gone out of the market, with average prices now 4.5% lower than last August’s peak. While the fear that interest rates could rise even higher boosted the number of mortgage approvals in June, the number of homes being sold is well down on where it was this time last year.
“As prices come down, two types of buyers are finding that the market is tilted firmly in their favour – those who need to move for work or family reasons and those who sense a bargain.”
In London, John Enis, chief of estate agents Chestertons, said that the property market remained stable, with buyer registrations reaching the “same level as in previous months”.
“Whilst there were fewer first-time-buyers with support from the Bank of Mum and Dad, we witnessed an increase in cash buyers and higher-valued property sales in excess of £1mn,” he said.
The demand to live in London has meant the city has been slightly curbed by the ongoing house price growth crisis – figures released by Zoopla last week show that prices in west Central London are up one per cent over the year.
“As the least affordable part of the UK, house price growth in London has been trailing the rest of the UK for several years,” Bill added.
“As a result, demand grew in more affordable regional UK markets, a process that was accelerated by Covid as buyers looked for space and greenery.
“That said, while the capital still suffers from an affordability squeeze, we are seeing stronger activity inside the M25 than outside because prices have been flatter in recent years and the expectation gap between buyers and sellers is smaller.”