UK house prices reported the first monthly fall in more than a year, reflecting the effect of rising borrowing costs on the residential property market.
House prices dipped 0.3 per cent between October and November, the first decline since October 2021, the Office for National Statistics said on Wednesday.
This brought the annual growth rate to 10.3 per cent in November, down from 12.4 per cent in the previous month, the data showed.
The average UK house price was £295,000, higher than before the onset of the Covid pandemic but a slight decrease from October’s record high of £296,000.
Mortgage rates have surged in the past few months, reflecting expectations of increased medium-term borrowing costs as the Bank of England seeks to tackle high inflation.
The rise in rates has cooled the property market, which boomed during the pandemic when borrowing was historically cheap.
The cost of living crisis, resulting from inflation running at above 10 per cent, is heaping further pressure on house prices with more people struggling to afford a deposit and monthly mortgage repayments.
Affordability has also been an issue for would-be homeowners since the start of the pandemic, as house price rises have outpaced wages.
Property prices are on track for a double-digit fall as the economic downturn “becomes entrenched”, said Andrew Goodwin, chief UK economist at Oxford Economics. However, he noted, the strong labour market and high share of fixed-rate mortgages would limit the price correction.
Barret Kupelian, senior economist at the consultancy PwC, expects an 8 per cent fall in house prices this year, in line with the trend in other advanced economies that are “also trying to cope with low economic growth, high inflation and tightening financial conditions”.
Separate mortgage data from Nationwide and Halifax showed that house prices fell month-on-month towards the end of 2022.
But ONS data revealed that house prices fell more sharply for cash buyers, by 0.4 per cent, with a slower annual price rate of 9.7 per cent, according to the ONS.
The data showed that England, Scotland and Wales all registered a monthly decline in house prices in November.
London reported the weakest annual pace of house price growth at 6.3 per cent — less than half the rate in north-west England, where they rose 13.5 per cent.
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said the capital’s underperformance was likely a reflection that “house price to earnings ratios are much higher than in the rest of the country”.
The ONS data was followed by the Royal Institution of Chartered Surveyors’ report on Thursday, which signalled a continued slowdown in sales activity and buyer demand in December 2022.
The RICS house price balance, which shows the difference between the proportion of survey respondents reporting rises and falls in house prices, slid to minus 42 per cent in December, well below the minus 26 per cent posted in the previous month.
The number of new property listings on the sales market declined too, with the level falling to minus 23 per cent — its lowest since September 2021.
The survey “highlights the emerging challenges in the housing market as new buyers grapple with more costly finance terms and uncertainty over the outlook for the economy”, said Simon Rubinsohn, chief economist at RICS.