Fastest house price fall since 2009...really?

First-time buyers are falling

The Halifax are predicting that first-time buyer numbers will fall by more than a fifth in 2023, according to their new transaction data. The mortgage lender estimates that about 186,000 people will buy their first home in 2023. Halifax has stated it feels the drop is directly linked to housebuilders and estate agents requiring bigger loans-to-value.

So far this year, the biggest drop in the number of people buying a property for the first time is 25 per cent in the south-east, followed by 24 per cent in London and East Anglia.

Second lowest sales volume for May

London

London has the second lowest volume of sales for the month of May 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 10% to 3,615, this is 48% down on last year's 6,956.

The Halifax's and Savile's reported falling house prices don't seem to be happening in London, as the most recent Land Registry data shows year-on-year increases since November 2019, with only marginal 1% falls in June and July this year. With average sale prices of £534,265, which is £9k short of the record high set in September 2022, London needs house prices to come down to make them affordable for buyers getting a mortgage.

England & Wales

England and Wales echo London with a 46% fall year on year for May and the average house price for July was only £3k off the record high set in November 2022 of £306,696. If house prices are falling between August and now, then it isn't showing in the actual Land Registry data.

Are house prices actually falling?

The Halifax house price index shows that house prices are falling at their fastest rate since the financial crisis in 2007-8 and have hit their lowest level in real terms since 2016. They write further, stating annual prices in August dropped 4.6 per cent with higher interest rates weighing on the property market; prices have fallen for five consecutive months.

The reason for this fall could be linked to prospective buyers delaying purchasing, in the hope of greater stability and clarity on the direction of rates in the coming months of September to November.

I prefer the overall data provided by the Land Registry, and the latest data for June 2023 shows house prices in England and Wales are up 2% year on year and only down 1% in London. I expect to see August and September average prices fall faster, which I will report on in the October housing market report.

Mortgage approvals are falling

Bank of England data shows that mortgage lending for purchases has fallen YOY by 37% for August 2023, which is in line with the overall shrinking of the housing market. Purchasers are looking for better deals; falling house prices or lower mortgage rates.

At SAM Conveyancing we have clients telling us that they can only afford to buy on the mortgage rate they secured in April, they'd not be able to buy their property based on the current rates with the same lender. This is why it is so important that you never let your mortgage offer expire and lose your rate. If this is happening to you, read our article - What happens if my mortgage offer expires?

What about the remortgage market?

Half a million households are set to come off their fixed-rate mortgages in the run-up to Christmas and January, which should see an increase in the number of remortgages, however, some may look to wait until the new year before securing a mortgage in the hope of a more favourable interest rate. This is evidenced in the Bank of England data, as remortgages are down by 49% YOY and 57% MOM.

With the Bank of England choosing to keep the base rate at 5.25%, mortgage lenders are able to offer more mortgage products. The Financial Times reported that UK mortgage rates are set to fall further following the Bank of England (BoE) decision to hold the base rate at 5.25 per cent. We will see the impact of this in our October report next month.

Homeowners are also faced with a jump in mortgage arrears. The Bank of England reported that the value of mortgage balances in arrears increased 29% year on year, in the three months to the end of June. This will impact a homeowner's ability to remortgage as their credit report will be impacted.

1.5 million homes in 10 years...really?

Labour are pledging to build new towns and suburbs to the tune of 1.5 million new homes in 10 years if they are voted into the next Government. Under the existing Conservative government, we see a close to record-breaking spike in new builds started in the second quarter of 73,620. The increase is primarily in Private Enterprise - 57,940 with affordable housing, following up with 13,930 for housing associations and 1,750 for local authorities.

The spike can't cover the gaping gap left from undersupply over the last 20 years, which has forced up house prices, however, it will help the current market get moving again.  

If Labour are planning to increase housing stock by 150,000 a year on top of current projects, then we could see building in excess of the 300,000 target the Government has always stated it needed to build to meet demand. If this happens, don't expect a sudden fall in house prices because most new build properties come with a top-end price tag.