Largest Decline In UK House Prices In Over A Decade: A Market Shift For Landlords

The UK housing market has encountered its most significant decrease in 12 years, with house prices falling by 2.6% within the year to June, according to data from Halifax. This downturn occurs simultaneously with the continued surge in mortgage rates; the average two-year fixed mortgage now stands at 6.54%, while a five-year fix is 6.04%, as per data from Moneyfacts. Experts anticipate these rates to grow further in the weeks to come, potentially instigating a significant correction or even a crash in the housing market.

For homebuyers, falling house prices could mean an opportunity to gain more value for their money by acquiring larger properties for less than they would have fetched a year prior. For instance, a 4% decrease in prices could mean a house usually valued at £300,000 would now be sold for £288,000, while a £400,000 house could be bought for £384,000.

Propertymark’s CEO, Nathan Emerson, commented, “Buyers are still making a healthy gain on the sale of their homes, allowing them to progress through the property ladder. Nonetheless, the extreme peak in property prices during the pandemic was unrealistic, hence buyers should be prepared for more moderate levels or be open to negotiate offers in line with the emerging market conditions.”

In a rapidly changing market, readiness to make swift offers is key. Broker Nick Mendes of John Charcol said, “If the price is right and the mortgage is affordable, there’s no better time than the present. Predicting when property prices will hit rock bottom and when rates will drop to coincide is impossible. Remember, property is a long-term investment and history shows you’ll inevitably be better off in the long run.”

For sellers, a decrease in sales may lead to the necessity to reduce asking prices further than initially desired. New data from analytics company TwentyCi shows a decline in agreed sales, an increase in sales falling through, and a surge in sellers altering their asking prices.

In reaction to this, sellers may choose to delay their sales, particularly given the potential difficulties faced in a declining market. As one withdrawal from a buyer could lead to a collapse of an entire chain of transactions, sellers who choose to persist will need to be more realistic about their asking prices.

Mendes advised, “Sellers who traditionally list the property price higher to gauge the market’s reaction need to be aware of current market conditions and make comparisons to previous years.”

For first-time buyers, despite the unpredictable market conditions, the escalating rental market may motivate them to take a risk and buy now, suggests housing market analyst Neal Hudson. He stated, “For some, especially first-time buyers, the terrible state of the private rental market might make the decision to buy now an attractive proposition.”

However, potential buyers must also consider the possibility of further drops in house prices, which could devalue their deposits and lead to negative equity. Consulting a broker may aid the decision-making process, but ultimately, the decision to buy depends on each individual’s circumstances.

Jason Tebb, Chief Executive Officer of OnTheMarket, added: “As the annual decline in average property prices continues, the high cost of living and potential for further rate rises are having an impact on how much buyers are willing and able to pay.

However, given all the economic uncertainty it is remarkable how relatively stable the market appears to be following a period of unprecedented house price growth fuelled by shortage of new properties coming to the market.

There are committed buyers but they are also increasingly price sensitive. Motivated sellers must price sensibly in order to generate interest and ensure their expectations with regard to timeframes are met.”