Halifax HPI: Biggest annual fall in 12 years is just the start

Sarah Coles, head of personal finance at Hargreaves Lansdown, comments on the publication of the Halifax HPI for June 2023, which shows the biggest annual fall in 12 years being just the start.

Key points from publication:

• • House prices are down 2.6% in a year – the largest annual fall for 12 years.
  • House prices fell 0.1% in June. It was the third consecutive monthly fall – albeit a small one.
  • The average property now costs £285,932. This is down £8,000 from the peak in August 2022.
  • New-build property is still up 1.9% in a year. All other property types saw falls, but flats are down 3.1% and terraced homes down 2.5%.
  • Prices in the south of England have fallen furthest over the year – with the South East down 3% and London down 2.6% (its weakest since 2009).

Sarah Coles comments:

“House prices fell like a feather in June. The fact we’re seeing such stark annual figures owes more to the fact they were going up like a rocket 12 months earlier than to any major changes during the month itself.

“However, the rise in mortgage rates is likely to act like a lead weight on prices in the coming weeks, dragging them down with more urgency.

“Halifax said mortgage approvals held up reasonably well during the month, especially among-first time buyers.

“This followed a reasonably robust May, when the Bank of England said approvals as a whole were up 3.1% in a month.

“However, it’s worth bearing in mind just how mortgage rates changed over the course of June.

“Two-year fixed rates started the month just under 5.5% and five-year deals at 5.1%, according to Moneyfacts, and they ended the month at 6.4% and just shy of 6% respectively.

“There’s always a lag effect when rates rise, and the house sales being counted in these figures are largely from buyers who secured mortgages before the recent ramping up of rates.

“All eyes will be on just how much damage may be done when new rates feed through into the figures.

“The impact of remortgaging will be felt very gradually as people come to the end of their fixed-rate deal.

“However, it will hit new buyers far quicker.

“There will be buyers who have been priced out of the property they need, and those who have been spooked by the sudden change and put a purchase on hold.

“Sellers have already started cutting prices to shift their properties.

“Zoopla figures showed one in 20 made a cut in May, averaging 9%. The summer is likely to see price cuts become even more widespread.

“Far from falling like a feather, demand could drop like a stone.”

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay