The housing research firm reported that, excluding the coronavirus lockdown period, new buyer inquiries in October saw the biggest drop since the financial crisis.
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LONDON — British house prices fell for the first time in nine months in December. This comes as the country’s budget and rising mortgage rates have slowed the recent wave of homebuyers.
Average property prices fell 0.2% from November to December, the first monthly decline since March, according to the latest data released by lender Halifax on Tuesday. This was lower than the 0.4% inflation rate predicted by economists polled by Reuters.
This means the average property value in the country has fallen slightly to £297,166 ($372,560).
House prices rose 3.3% in December compared to the same month last year, but the annual price growth rate was also down from 4.7% in November and lower than economists’ expectations of 4.2%.
British housebuilding company shares Taylor Wimpey, persimmon, bellway and Barratt Redrow All fell after the data was released on Tuesday morning.
UK house prices rose steadily in 2024, rising for the fifth consecutive month after a brief slump as sentiment rebounded on the back of the UK election and the start of the Bank of England’s interest rate cutting cycle.
However, dampening interest rate expectations on the back of the government’s tax and spending budget, which pushed up Britain’s borrowing costs, put pressure on trading towards the end of the year.
Amanda Bryden, head of mortgage lending at Halifax, said rising mortgage rates are likely to continue weighing on the market in 2025, even though inflation remains “moderate.” said.
“Mortgage affordability will remain a challenge for many, particularly as the reduction in bank interest rates is likely to be slower than previously expected,” Mr Bryden said.
Second crack in the housing market
The fall in house prices came after the number of mortgage approvals in November was lower than expected and below the figure recorded in October, according to data released by the Bank of England on Friday.
Tom Bill, head of UK housing research at Knight Frank, said the comprehensive survey results had caused turmoil in the housing market after the government’s October 30 Budget cast doubts on the country’s economic outlook. He said this shows that he is starting.
“The fact that borrowing costs are going up makes it inevitable that there will be some slowdown in the post,” Bill told CNBC’s “Street Signs Europe.”
Analysts now expect transactions to pick up in the first few months of the year, as upcoming changes to key homebuyer taxes will incentivize buyers and sellers.
The government has announced it will end stamp duty land tax cuts in its pandemic-era budget. This means buyers will be subject to higher transaction costs from April 1st.
Stephen Perkins, managing director at Yellow Brick Mortgages, said: “There is no doubt that the stamp duty changes are the main driver of demand right now, which is supporting property values.”
However, Bill noted that this increase in transactions is likely not to continue for long and expects it to subside after the second quarter.
“To some extent, the clock is ticking,” he said.
In response to the Budget, Knight Frank revised down its forecast for UK property price growth in November. It now expects average property prices to rise 2.5% in 2025 and 3% in 2026, down from its August forecast of 3% and 4%, respectively.
