Thursday, September 21News For London

Some parts of the United Kingdom have seen property prices decline for the fifth month in a row.

image credit: rightmove

United Kingdom is facing a fall in housing prices in some parts of the regions consecutively for the fifth month in a row. It has been observed that falling housing prices can occur for various reasons it includes not only recession but inflation, cost of living and rising mortgage costs are playing a huge role for the continuing fall.

Homeowners may incur increased costs as a result of inflation, which is the rise in the average price level of goods and services in an economy. Homeowners may find it harder to make their mortgage payments when living expenses rise, which might result in more defaults and foreclosures. In addition, rising interest rates can make it more difficult for purchasers to get mortgages, which would decrease housing demand and cause a decline in home values.

The housing market may be impacted by the cost of living as well. People may have less money to spend on housing as the cost of necessities like food, healthcare, and transportation rises, which would decrease the demand for homes and drive down prices. Additionally, people may be forced to downsize or put off buying a home when incomes are not keeping up with the cost of living, which lowers demand for housing.

Falling home values can result from increasing mortgage expenses. When mortgage rates increase, it might be more expensive for buyers to get a loan, which would decrease the demand for properties and drive down prices. Additionally, it might be harder for consumers to get a mortgage when mortgage lenders tighten their requirements, which would decrease the demand for homes and drive down prices.

According to building society Nationwide, the average home price last month was £258,297, a 0.6% decrease from December. Nationwide also cautioned that the market is unlikely to “gain much momentum in the near term.”

The fact that prices are declining has a beneficial impact on those considering purchasing their first home in the United Kingdom. It is said by the economist Martin Beck from the EY ITEM Club consultancy, “Property prices are likely to continue falling for the foreseeable future.”

A decline in housing costs in the UK has a number of advantages:

  1. Affordability: Lower housing costs can help first-time buyers and individuals with lower salaries afford homes, enabling them to enter the housing market.
  2. Demand growth: As housing costs decrease, demand for homes is projected to rise. This might help the building sector and open more job possibilities.
  3. Opportunities for refinancing: Owners of homes with high-interest mortgages may be able to refinance their loans and get reduced interest rates, saving them money over time.
  4. Increased housing supply: Lower house prices may encourage more homeowners to sell their properties, which will boost the housing stock and assist avoid shortages.
  5. Reduced property taxes: As housing costs decline, the taxable value of homes may as well, which could result in a reduction in homeowners’ property taxes.
image credit: flickr

In general, a decline in housing costs can benefit the economy and increase home affordability and access for a large number of individuals.

Following a 29% increase in housing prices on the official measure due to the COVID-19 pandemic and tax advantages, the market is already exhibiting symptoms of a correction. Mortgage approvals by the banks went down suddenly during the recent months as the interest rates hit new highs in 15 years. As Robert Gardner, Nationwide’s chief economist, said: “There are some encouraging signs that mortgage rates are normalising, but it is too early to tell whether activity in the housing market has started to recover.

Indicators of the housing market have also revealed a dramatic slowdown, which is due to a combination of factors including rising interest rates, a weakening economy, and growing living expenses for households.

Lenders authorised far fewer mortgages than anticipated in November, according to Bank of England data released on Wednesday.

In October, a lot of lenders withdrew their mortgage offers as a result of the turbulence in the bond market brought on by Liz Truss’s short-lived tax-cut plans.

All of the UK’s areas have seen a slowdown in home price increase in recent months, although some have seen a more severe decline than others. First-time home purchasers have benefited greatly from this because it has significantly created a substantial decrease in the prices in the locations listed below.

According to Nationwide, East Anglia suffered the most in the three months leading up to December. From 11.2 to 6.6 percent in the preceding quarter, there was a slowdown in the growth of home prices.

House price increases in the West Midlands decreased from 12% to 6.1%. In contrast, there has been a decrease in the East Midlands, from 12.3% to 5.3%.

With growth there currently at 3.3%, down from 7.8%, Scotland is the region that has been least impacted.

One of the largest mortgage lenders in the nation, Nationwide, reported on Thursday that annual house price rise has slowed to 1.1% from a December high of 2.8%.

Since its peak in August of last year, the average property value has decreased by 3.2%.

January 2023 saw a £258,297 national average for home prices. Since the beginning of the coronavirus pandemic in June 2020, when home values decreased by 0.1% annually, the annual growth rate has been at 1.1%, which is the lowest since that time.

In September of last year, home price growth paused, and then declined by 1% in each of the following months: October, 1% in November, and 0.3 in December.

After the mini-Budget, lenders began offering higher mortgage rates, and as the Bank of England base rate has risen, borrowing costs have also gone up.

“As we enter 2023, the housing market will continue to be impacted by the wider economic environment and, as buyers and sellers remain cautious, we expect there will be a reduction in both supply and demand overall,” Halifax director Kim Kinnaird said.