In a concerning turn of events, the annual rate of house price growth dipped into negative territory this May, marking the first occurrence of such a decline since 2012, according to the latest report by Halifax. Over the course of the past 12 months, typical house prices witnessed a decline of 1%, a significant drop from the 0.1% annual growth rate recorded in April, resulting in the average property now being valued at £286,532.
The report indicates that house prices remained relatively stagnant in May, experiencing a modest decrease of merely £130 compared to the average value of £286,662 in April. Explaining the annual rate of decline, Kim Kinnaird, director of Halifax Mortgages, attributed it to the comparison with the “strong house prices this time last year,” as the market continued to thrive heading into the summer months.
Kinnaird further remarked that property prices have diminished by approximately £3,000 over the past year, a drop of around £7,500 since the peak in August. However, she emphasized that prices still reflect an increase of £5,000 since the end of last year and a substantial £25,000 surge compared to two years ago.
The UK housing market is inundated with various indices, each presenting a distinct perspective on its current performance. The mortgage market has played a significant role in the decline of average home values over the past year. Mortgage rates have escalated, impeding potential buyers’ borrowing capacity, particularly when their finances face additional strain due to persistently high inflation rates.
Kinnaird noted that financial markets anticipate the Bank of England’s base rate to surpass 5% for the first time since 2008 as the institution endeavors to combat inflation. These projections have led to another round of increased interest rates on fixed-rate mortgages, inevitably denting confidence in the housing market. The latest industry figures for mortgage approvals and completed transactions indicate a cooling in demand as both buyers and sellers recalibrate their expectations.
Southern England experienced the most notable decline in house prices over the past year. For instance, prices in the South East plummeted by 1.6%, with the average now standing at £385,943, while the South West witnessed a 1.4% drop to £301,079. Greater London also faced larger-than-average falls, with prices declining by 1.2%.
The Halifax report revealed that all regions of the UK, except Wales, witnessed a weakening in annual house price growth in May compared to April. Wales maintained steady growth at 1.1%. The West Midlands emerged as the best-performing region over the past year, with prices escalating by 2.7% to reach an average of £251,137. Yorkshire & Humberside secured the second spot, recording a 2.3% increase, bringing average prices to £205,035.
Existing houses experienced a stark decrease in value, with an annual decline rate of 1.9%, according to Halifax. Conversely, the value of new build properties rose by 2.8%, although this marks the slowest rate of growth observed in nearly three years.
Detached houses were the sole property type to witness annual growth, with values increasing by 0.4%. Flats experienced the sharpest decline at 1.9%, followed by terraced houses (-1%) and semi-detached houses (-0.5%).