House price slip becomes a slump: biggest annual drop in 14 years

Sarah Coles, head of personal finance at Hargreaves Lansdown, comments on Nationwide’s March House Price Index, showing house price slip becomes a slump, becoming the biggest annual drop in 14 years.

Key points from publication:

• • House prices are down 3.1% – the biggest drop since July 2009.
  • It’s the seventh consecutive month of house price falls.
  • Prices fell faster in March than in February – down 0.8% in a month compared to a 0.5% drop in February.
  • The average house price is £257,122. This is 4.6% below August’s peak (£273,751).

Sarah Coles says:

“The house price slip has become a slump, with the biggest annual price drop in 14 years. The pace of descent accelerated, and we’re already almost 5% below the peak in August.

“Unfortunately, the indications for the future aren’t looking terribly promising either.

“Buyers have been broken by rampant inflation, jacked-up mortgage rates, a stagnating economy, and the threat that there could be worse to come.

“RICS figures for February showed that buyer demand fell again – for the tenth consecutive month. 

“Buyer enthusiasm is likely to have been dampened even further by the fact the gradual fall in mortgage rates stalled in March.

“At the end of February, according to Moneyfacts, the average two-year deal was at 5.32%, and by the 30 March it had risen very slightly to 5.38%.

“As a result, sellers are having to compromise in order to shift their properties. RICS says that 60% of homes worth up to £500,000 are selling for less than the asking price, and Zoopla found that 40% of home sellers are cutting their prices even before a seller comes along – by an average of 4.5%.

“There is a glimmer of hope on offer from the mortgage market. The bump in rates is likely to be a temporary blip, due to inflation coming in higher than had been expected.

“As we get further into the year, we’re expecting inflation to fall significantly, so we may well see rates on the way down again.

“Already February saw a very small pick-up in the number of mortgages approved for the coming months.

“However, it’s still less than half the numbers we were seeing two years earlier, so you need to look very closely to see any real hope in these figures.

“It’s easy to read these figures as the start of a slippery slope, where price drops start gradually and then accelerate.

“We can’t yet rule out the chances of a gradual drift south and a softer landing, but it’s looking increasingly unlikely.”

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay