House prices recorded the biggest monthly fall in October since early 2021, according to the latest analysis from Halifax. And two Bristol property experts predict that prices will drop further as the cost of living crisis continues.
The average property value fell by 0.4 per cent nationally, marking the third month-on-month drop seen in the past four months, Halifax said. The latest month-on-month decrease follows monthly falls of 0.1 per cent in both July and September and a 0.3 per cent increase in August.
Annual house price growth slowed to 8.3 per cent in October, from 9.8 per cent growth recorded in September. Across the UK, the average house price in October was £292,598, which was the lowest figure since May this year, although typical prices remained near record highs, Halifax said.
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Nationally, annual price growth among home movers fell to 8.9 per cent in October, from 10.3 per cent in September. In the South West, average house prices in October were at £310,737, up 10.8 per cent compared to the previous year.
The price growth slowdown for first-time buyers was more notable, Halifax said, slowing from 10.1 per cent in September to 7.5 per cent in October. Given the greater challenges for first-time buyers in deposit-raising, plus tighter requirements for higher loan-to-value mortgages, the faster slowdown in prices is not surprising, Halifax said.
Andrew Simmonds, director at Bristol-based Parker’s Estate Agents, said: “Since the summer, I’ve been telling vendors that their house is worth what it was worth 12 months ago. I’ve lost instructions because they’ve said ‘nah’.
"This is mainly because of deluded competitors who feed them bull. Plenty have since come back to me saying 'you were right'. I’m expecting average prices to be down 20 per cent by March.”
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com, added: “My best guess is house prices will fall 15 per cent -20 per cent in 2023. Affordability for first-time buyers is much tighter, affecting the whole market.
"Unable to borrow as much, prospective buyers will either wait or offer less. Anyone coming to the end of their dirt cheap fixed-rate deal and unable to afford the higher re-mortgage rates on offer will be a very motivated seller. Many will reduce their asking prices significantly for a fast sale, causing prices to fall sharply."
'Keep it in context'
Kim Kinnaird, director of Halifax Mortgages, said: “The drop of 0.4 per cent is the sharpest we have seen since February 2021, taking the typical property price to a five-month low of £292,598. Though the recent period of rapid house price inflation may now be at an end, it’s important to keep this in context, with average property prices rising more than £22,000 in the past 12 months, and by almost £60,000 (25.7 per cent) over the last three years, which is significant.
“While a post-pandemic slowdown was expected, there’s no doubt the housing market received a significant shock as a result of the mini budget, which saw a sudden acceleration in mortgage rate increases. While it is likely that those rates have peaked for now – following the reversal of previously announced fiscal measures – it appears that recent events have encouraged those with existing mortgages to look at their options, and some would-be homebuyers to take a pause.
“Understandably we have also seen consumer caution grow as industry data shows mortgage approvals and demand for borrowing declining. The rising cost of living coupled with already stretched mortgage affordability is expected to continue to weigh on activity levels.
“With tax rises and spending cuts expected in the autumn statement, economic headwinds point to a much slower period for house prices. While certain longer-term, structural market factors which support higher house prices – like the shortage of available properties for sale – are likely to remain, how significantly prices might ultimately adjust will also be determined by the performance of the labour market.
“Currently, joblessness remains historically low, but with growing expectations of the UK entering a recession, unemployment is expected to rise. Whilst it may not spike to the same extent as seen in previous downturns, history tells us that how this picture develops in the coming months will be a key determinant of house price performance into next year and beyond."
Last week, the Bank of England increased the base rate to 3 per cent, from 2.25 per cent previously. This was the latest in a string of base rate increases, meaning that since December last year the average monthly tracker mortgage payment will have increased by £284.17 in total, according to figures from trade association UK Finance.
Here are average house prices in October, according to Halifax, followed by the annual price increase:
– East Midlands, £244,842, 10.5%
– Eastern England, £340,607, 8.4%
– London, £551,320, 6.8%
– North East, £172,337, 10.3%
– North West, £229,762, 11.4%
– Northern Ireland, £184,440, 9.5%
– Scotland, £203,820, 7.5%
– South East, £399,080, 9.1%
– South West, £310,737, 10.8%
– Wales, £222,852, 11.7%
– West Midlands, £254,962, 11.7%
– Yorkshire and the Humber, £208,717, 11.0%
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