ONS House Price Index: Fastest house price drop since 2011

Sarah Coles, head of personal finance at Hargreaves Lansdown, comments on the publication of the ONS House Price Index, showing the fastest house price drop since 2011.

Key points from publication:

• • Average house prices across the UK were down 2.1% in the year to November. They had fallen 1.3% in October, and this is the third consecutive month of falls.
  • This is the fastest annual drop since 2011.
  • On a seasonally adjusted basis, prices fell 0.4% in a month.
  • The average house price was £285,000 – down £6,000 in a year.
  • House price movements ranged from a drop of 0.4% in the North East to a fall of 6% in London.
  • The highest average price was in London, at £505,000, but with a drop of 6% in a year, London saw the fastest annual fall since 2009.
  • All property types fell in price, with terraces down 3.8% and flats down 1.8%.

Sarah Coles says:

“House price falls accelerated in November, as they endured the steepest drop in 13 years.

“It reflects just how dire things were at the tail end of the summer, when so many of these sales were agreed.

“While mortgage rates have fallen in the months since, we’re not out of the woods yet.

“The market still faces some serious challenges, which could pull prices even lower.

“Mortgage rates reached a peak in August, and many buyers struggled to be able to borrow as much as they needed.

“Over this period, sales ground to a halt, so an awful lot of sellers were forced to cut their prices in order to shift their home.

“Even as prices fell, buyers sat on their hands, and the RICS survey showed that buyers were still thin on the ground in November.

“There is a small glimmer of hope, because mortgage rates have continued to drop, and the average 2-year rate has fallen to 5.62%, according to Moneyfacts – a full percentage point lower than it was four months ago.

“Even the big lenders are offering rates below 4%. It means we could see a small pick-up in demand when the figures for December and January come in.

“However, sellers shouldn’t get too excited just yet.

“Today’s surprise rise inflation, combined with concerns about oil prices and the supply of goods as a result of conflict in the Red Sea, could put the brakes on mortgage rate cuts.

“When you consider the risks facing the world economy, and the fact the UK economy is teetering on the brink of recession, there’s every chance that the property market has some seriously tricky months on the way, and this may not be the last of the price falls we see in 2024.

“This is worrying not just for sellers, but for homeowners in general, particularly those on average incomes, who are hit hard by house price falls.

“They typically have less equity in their home, so they run the risk of falling into negative equity if prices fall far enough.

“In addition, the HL Savings & Resilience Barometer highlights that it can have a knock-on impact on your financial resilience in retirement.

“If you were relying on price rises to help you pay off your mortgage by trading down in older age, price falls could scupper your plans, leaving you paying a mortgage in retirement.

“Even if you can pay the mortgage off, having a less valuable property in retirement gives you less flexibility to free up equity.”

Kindly shared by Hargreaves Lansdown