Where are these falling house prices?

01/11/2023
(Last Updated: 08/11/2023)
9 min read

Average House Price London (Aug)

£535,597

Sales Volume London (June)

4,524

Average House Price England & Wales (Aug)

£304,550

Sales Volume England & Wales (June)

41,443
Key Takeaways

  • Property sales fell by 35% year on year for England and Wales, making June a record low for the month.
  • House prices remain close to record highs at £304,550 in England and Wales until August.
  • Bank of England set to keep base rate at 5.25% until the middle of 2024
  • Property Mark reports, "There has been a slight reduction in available properties for sale, and this reflects ongoing market uncertainty".
  • Remortgage volume fell to levels last seen in 1999
  • Jeremy Hunt is drawing up a package of support to help first-time buyers ahead of next month’s autumn statement.

November 2023 Housing Market Report
In the June 2023 housing Market Report, Zoopla stated "One in six house sellers accepted offers on their properties of at least ten per cent less than their original asking price last month".

Great news for buyers; however, August had the highest average sale price for the month since records began.

New figures from Halifax showed that house prices have risen for the first time in six months, increasing by 1.1 per cent in October, taking the average property value to £281,974. It is reported the rise is driven by sellers taking a cautious attitude, leading to fewer homes on the market. However, Halifax expects house prices to fall further overall and return to growth from 2025 onward.

The instability in the base rate has really affected the housing market, causing remortgage volumes to fall to 1999 lows and new approvals to fall year on year by 32%. The market is waiting for the base rate to drop; however, Huw Pill, the chief economist of the Bank of England, states that interest rates are unlikely to return to the near-zero levels seen in the 2010s. Rates are instead likely to settle at a level “below where we are” but probably higher than the pre-Covid era. Pill, speaking in an online presentation organised by the Bank of England, suggested that the Bank might wait until the middle of next year before cutting interest rates from their current 15-year high.

Savills said that demand from homebuyers would gradually return as mortgage interest rates fall, predicting home prices would rise every year between 2025 and 2028. Prices held up slightly better than expected this year, with property values estimated to be down a total of 7% from autumn 2022 to the end of 2023.

There is hope, as the SONIA (Sterling Overnight Index Average), which is an important interest rate benchmark, shows signs of falling under 5%, allowing mortgage lenders to offer products of 5% and under with greater certainty that the base rate isn't going to go up from 5.25%.

Source: Office for National Statistics (ONS)



What our survey revealed about homebuyers
Our survey, conducted by YouGov, reveals the top challenges faced homeowners when buying their most recent property, plus the true costs of defects when skipping a home buyers survey.


What are homebuyers looking for?

Will the base rate stay at 5.25%?

The BBC has reported that interest rates are expected to be held again next month after the economy grew 0.2 per cent between July and August. The Bank of England’s chief economist Huw Pill also said that he expected future decisions on interest rates to be “more finely balanced”.

Swati Dhingra, a member of the Bank of England’s Monetary Policy Committee, said the full force of the previous rate rises has not yet “been fed through to the economy” and will hit primarily young and poor households as more fixed-rate loans and mortgages come to the end of their fixed terms and families are faced with the higher rates now available.

After so many rapid increases in the base rate that some economists criticised as too aggressive and not allowing the market to adjust, it should remain the same through the first quarter of 2024.

Autumn Statement: The end of 5% deposits?

Potential to extend into 2024

The government is considering expanding its mortgage guarantee scheme to help more first-time buyers borrow with a 5% deposit. The scheme was extended for 12 months to finish in December 2023, but may continue for another year. There are also discussions regarding a new saving scheme for deposits.

Stamp Duty rebate for eco improvements

New homeowners who make their properties more energy efficient within two years could receive a partial stamp duty rebate. The plan was recommended by the Energy Efficiency Taskforce, which the chancellor set up in last year's Autumn Statement. If this happens, you need to read 'How to make your home more energy efficient' which includes a breakdown of costs.


Why are we just helping first-time buyers?

London tenants, on average, spend 35 per cent of their income on rent from March 2022, compared with 26 per cent in the rest of England, according to the ONS. They also reported that the UK’s unemployment rate climbed from four per cent in the previous quarter to 4.2 per cent. This is the first time that the ONS has drawn on tax records and benefits claims rather than its labour force survey.

High rents and increasing unemployment will hinder first-time buyers in their pursuit to get onto the housing ladder in 2024 without help from the Government.

It's great that Jeremy Hunt is looking at schemes to help first-time buyers get onto the housing ladder; but upsizing homeowners will have to tough it out. During Covid, there were adjustments to the Stamp Duty Land Tax for properties up to £500,000, which meant anyone could benefit from the £15,000 tax saving. This galvanised the market for both first-time buyers and homeowners and saw house volumes increase not just for first-time buyers but also for existing homeowners. We are waiting on the autumn statement to see what support may be announced for home-movers.



Lowest sales volume for June


London Property sales fall by 50%. A Cartoon of a man trying to hold up the property market with ropes

London has the second lowest volume of sales for the month of June since records began; the lowest was during Covid when the housing market was placed on freeze by the Government. Whilst volume increased month on month by 18% to 4,524, this is 36% down on last year's 7,119.

Source: House Price Index (HPI)


England & Wales

England and Wales echo London with a 35% fall year on year, which made the month of June the worst on record. With average house prices for August being only £8k off the record high set in November 2022 of £306,696, the market is set to see a fall over the next six months.

Source: House Price Index (HPI)


As previously flagged, the trends of the Halifax, Zoopla and Rightmove data don't show the true market picture. Even Propertymark states, "the vast majority of properties continue to sell below asking price, pointing to a pricing correction despite average house prices continuing to rise." I prefer the overall data provided by the Land Registry, and the latest data for August 2023 shows house prices in England and Wales are similar to last year and only down 1% in London. I expected to see August and September average prices fall faster; however, with sellers holding off coming to market, the average house price is holding strong.

Average house prices are not falling, but sales are going under the asking price; what is going on?

Asking prices are higher than average house prices. The asking price is suggested by the selling agent and agreed with the seller. The asking price is normally linked to previously sold properties in the area, with an additional X% added for growth and negotiation room.

This means that even though sales are being agreed-to under the asking price, it isn't under the current average price for the property. As such, the average sale price remains close to record highs with only minor single-digit percentage falls. Until asking prices are set closer to current selling prices, there won't be a huge fall in house prices. Savills have echoed this as they stated that the housing market is past its “peak pain”, with prices expected to fall three per cent in 2024 before beginning to rise.



Source: House Price Index (HPI)


Remortgages

Data from the Bank of England shows that the proportion of banks reporting an increase in missed mortgage payments between July and September outweighed the number reporting a fall in defaults by a margin of 43.3 per cent, up from 30.9 per cent. This is the highest level since 2009.

The Bank of England also reported that remortgage approvals fell to 20,588 in September, making this the lowest level since January 1999. Homeowners are sitting tight waiting for lower-rate mortgages - a wait that could last until mid-2024.

Source: Bank of England
Andrew Boast FMAAT MIC
CEO and Author | SAM Conveyancing

Summary
There has been so much media talk of falls in house prices; however, the overall market isn't showing any huge falls. As 2023 comes to a close and the base rate is set to remain at 5.25%, I expect to see more sellers enter the market in January to benefit from the high sale prices and potentially more buyers with a wider range of affordable mortgage products.

I expect to see an incentive in the Autumn Budget to stimulate the housing market. Whether this is a pledge to build more, a saving scheme for first-time buyers, or even an SDLT incentive for homeowners, what is clear is that buyers need all the help they can get.

With asking prices continually over the recently sold house prices, I see a market that has a great opportunity for buyers to negotiate harder and get a more realistic value in this current market.

Instead of a charge to the end of a fantastic year, I see the end of 2023 as more of a limp of a weary wanderer needing some rest over winter in the hope that January will bring more energy.

Sources: Latest data from - Gov.UK, Bank of England, UK House Price Index, ONS and Property Mark (NAEA).

Slow
Buy
Andrew Boast of Sam Conveyancing
Written by:
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh Bailey, Digital Marketing Manager
Reviewed by:

Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.

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