UK home costs submit largest decline in a decade as greater charges chew

UK home costs dropped greater than anticipated final month and posted the primary annual contraction because the begin of the pandemic as inflation and better mortgage charges hit potential consumers.

Property costs fell 1.1 per cent in February, the biggest decline in a decade, in contrast with the identical month final 12 months, down from a 1.1 per cent enhance in January, mortgage supplier Nationwide mentioned on Wednesday. Economists in a Reuters ballot had forecast a 0.9 per cent contraction.

It was the primary annual contraction since June 2020 when the housing market was successfully shut through the Covid-19 lockdown.

Excluding the early part of the pandemic, the final time UK home costs contracted on an annual foundation was December 2012.

Mortgage charges rose to a decade excessive in December following rate of interest expectations set by the Financial institution of England because it tries to rein in traditionally excessive inflation.

Line chart of Average price, £ '000 showing UK house prices declined in February

The typical home worth fell to £257,406 in February, down from a peak of £273,751 in August.

The weak point of the housing market “seemingly displays the lingering affect on confidence in addition to the cumulative affect of the monetary pressures which were weighing on households for a while”, mentioned Robert Gardner, Nationwide’s chief economist.

Home costs had been down 0.5 per cent in contrast with January, the most recent month-to-month decline since costs stopped rising in August 2022.

Gardner mentioned “it will likely be exhausting for the market to regain a lot momentum within the close to time period since financial headwinds look set to stay comparatively sturdy”.

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, mentioned home costs will “proceed to say no over the subsequent six months or so, leading to a peak-to-trough fall of about 8 per cent”. Nevertheless, she expects home costs to extend once more in 2024 as “mortgage charges fall considerably and households profit from decrease wholesale power costs”.