Halifax HPI February 2023: Hopes of a soft landing, but harsh truths remain

Sarah Coles, head of personal finance at Hargreaves Lansdown, comments on Halifax HPI for February, showing that hopes of a soft landing, but harsh truths remain.

Key points from the publication:

• • In February, annual price rises stuck at 2.1% for the third consecutive month.
  • They were up 1.1% in a month, to an average of £285,476.
  • Average prices are down around £8,500 from the peak in August 2022, but are still £9,000 above the average in early 2022.
  • The price of flats fell 0.3% in the past year, terraces are up just 0.3%, and detached homes up 1.5% – the lowest rise since the end of 2019.
  • The price of new builds is up 6.6%, while existing properties are up 1.1% – the lowest in almost a decade.

Sarah Coles says:

“Average house prices ticked up gently in February, keeping annual rises around 2%, and raising hopes we could be heading for a soft landing.

“But there’s an awful lot stacked against the market, which could tip it into a more painful decline.

“Optimism has survived another difficult month.

“Buyers have seen mortgage rates drop back consistently for the past few months. They also have the comfort of relative strength in the employment market, and as a result, consumer confidence has recovered a little.

“So there remains a glimmer of hope that house price falls this year could remain in single digits.

“However, it’s far too early to be calling a soft landing, because there are still an awful lot of challenges facing the market, which mean it’s likely to decline from here, and we can’t rule out something more substantial.

“House prices from Halifax fell over the quarter as a whole, so the trend is still downwards. When you drill further into the figures, it’s clear certain parts of the market are pushing the average up, and some are looking pretty miserable. Looking at flats alone, prices are down over the year.

“Meanwhile, when you remove new builds from the equation, overall prices are up around 1% – the smallest rise in almost a decade. Falling or stagnant prices could persuade buyers that a wait-and-see strategy is still worth pursuing.

“The resilience of prices in some corners of the market so far could actually work against sellers, especially now that mortgage rates are higher. A combination of the two – plus higher overall prices feeding into affordability calculations – means that even if buyers are still keen to move, their mortgage company may have other ideas

“On the supply side, while mortgage rates have fallen back from the heady heights in the wake of the mini-Budget, for remortgagers, they are still way ahead of their levels back when they last fixed.

“As a result, the HL Savings & Resilience Barometer shows that remortgaging will eat up an extra 3.1% of their income – which is the equivalent of an 80% rise in their energy bills. It means 2 million people will be spending so much of their income on the mortgage that they’re at risk of falling into arrears.

“Looking at their wider resilience, 650,000 of them don’t have the savings to protect them from this attack on their household budgets. As time goes on, we can’t rule out significant numbers of forced sellers flooding the market and pushing prices down.

“Already Zoopla figures from February show home sellers are cutting prices by an average of £14,100 – or 4.5% in order to shift property. It’s the biggest discount in five years, and means giving up a third of their pandemic price rise.

“Rightmove, meanwhile, says that asking prices rose just £14 in February – at a time of year when sellers are usually gearing up for a busy spring. 

“Meanwhile, buyers remain unconvinced.

“The RICS survey shows that in January buyer numbers continued to fade for the 9th month in a row, while house prices on agreed sales declined for the fourth consecutive month.

“Meanwhile, HMRC statistics showed house sales plummeted in January – making it the slowest January for sales in a decade.

“Data from the Bank of England showed that in January the number of mortgages approved for purchases in the coming months fell for the fifth consecutive month. 

“Excluding the early pandemic period, when the market was effectively closed, it was the lowest number of approvals since 2009 – back when house prices had fallen 15% in a year and buyers were few and far between.”

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay