House prices fall again, and affordability figures reveal one reason why: ONS

Sarah Coles, head of personal finance at Hargreaves Lansdown, comments on the publication of the ONS January house price figures and the housing affordability data, showing house prices fall again, and affordability figures reveal one reason why.

Key points from publications:

• • House prices fell 1.1% between December and January (non-seasonally adjusted).
  • Average house prices were up 6.3% in the year to January – down from 9.3% in December.
  • The average house price hit £290,000: £17,000 higher than a year earlier.
  • London house prices hit £534,000, but are up just 3.2% in a year.
  • The price of flats is up just 2.3%, while semi-detached houses are up 7.5%.
  • New-build property prices are up 22.3%.
  • In 2022, a full-time employee in England could expect to spend 8.3 times their annual earnings buying a home, and in Wales it was 6.2 times.

Sarah Coles says:

“January was a miserable month for property. Three months on from the peak of mortgage rates in October, the horror of higher mortgages fed through into falling prices.

“Prices were down more than 1% in a month, and annual growth is now just 6.3%.

“We can expect more weakness from here, as prices continue to fall, but the jury is still out on how low things will go.

“Affordability calculations reveal just why rising rates have taken such a toll on buyer confidence.

“With the average full-time employee in England spending 8.3 times their annual income in order to buy a typical home, we’re being forced to take on ever-larger mortgages.

“It means a small change in mortgage rates has a far larger impact on our monthly payments.

“On the positive side, from October onwards, mortgage rates started to drop back, and while there were no sudden movements, there’s the hope that as they kept falling, confidence will have started to rebuild a little.

“We’ve seen a bit more volatility recently, but rates are still expected to trend downwards through the rest of the year as inflation eventually drops back. 

“However, it doesn’t alter overall predictions that annual house price inflation will turn negative, and the Office for Budget Responsibility expects them to drop 10% from the peak.

“The Nationwide and Halifax indices are more up-to-date because they measure the prices of agreed sales, and their most recent measures show prices have fallen between 3% and 6% from their high point. 

“Most of the forward-looking indications don’t look brilliant either.

“The Bank of England said that in January the number of mortgages approved for purchases in coming months fell for the fifth month in a row, and excluding the onset of the pandemic – when the market was effectively closed – it’s the lowest level of approvals since 2009.

“Meanwhile, Zoopla has found that home-sellers are cutting prices by an average of £14,100 – or 4.5% to shift their properties, and RICS continues to chart the fall in demand from buyers.

“If you’re planning to buy, the likelihood of falling mortgage rates and falling prices may persuade you to put off a purchase. 

“If you can’t afford to wait, then it will be even more important to shop around for the best possible mortgage deal – and negotiate hard on price to protect yourself from price falls in the coming months.”

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay