Housing surveyors reported 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 in December for the first time in nine months as the country’s budget and higher mortgage rates dampened a recent spate of home buying activity.
Latest data from bank Halifax on Tuesday showed average house prices fell 0.2% between November and December, the first monthly fall since March. That was lower than the 0.4% price rise forecast by economists polled by Reuters.
This means the average property value in the country fell slightly to £297,166 ($372,560).
House prices increased by 3.3% annually in December, but the average annual price increase was also lower than November’s 4.7% and lower than the 4.2% forecast by economists.
UK homebuilder shares Taylor Wimpey, persimmon, bellway and Barratt Redrow All stocks fell after the data came out Tuesday morning.
After a brief lull as sentiment picked up following the UK election and the start of the Bank of England rate cut cycle, UK house prices rose steadily in 2024, rising for five consecutive months.
However, cooling interest rate expectations – including the government’s tax and spending budget pushing up UK borrowing costs – put pressure on year-end trading.
Halifax mortgage director Amanda Bryden said rising mortgage rates were likely to continue to weigh on the market in 2025, although price growth remained “modest”.
“Mortgage affordability continues to be a challenge for many people, particularly as bank rates are likely to fall more slowly than previously forecast,” Brydon said.
The second crack in the housing market
Data released by the Bank of England on Friday showed that November’s mortgage review was lower than expected and lower than the number recorded in October, causing house prices to fall.
Tom Bill, head of UK residential research at Knight Frank, said the combined data showed the housing market had begun to experience volatility after the government’s October 30 budget raised questions about the country’s economic outlook. economic prospects.
“A slowdown is inevitable as borrowing costs rise,” Beer told CNBC’s “European Signpost.”
Analysts now expect transaction volume to increase in the first few months of the year as upcoming changes to a key home purchase tax will incentivize buyers and sellers.
The government announced in the budget the end to stamp duty cuts during the pandemic, which means buyers will face higher transaction costs from April 1.
Stephen Perkins, managing director of Yellow Brick Mortgages, said: “Changes in stamp duty are certainly a key driver of demand at the moment, which is supporting property values.”
However, Beer noted that this increase in transactions may be short-lived and is expected to calm down starting in the second quarter.
“In a way, the clock is ticking,” he said.
Knight Frank lowered its UK property price growth forecast in November following the budget announcement. Average house prices are now expected to rise 2.5% and 3% in 2025 and 2026, respectively, down from the 3% and 4% forecast in August.
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