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Industry reaction to Nationwide House Price Index

by | Aug 1, 2023

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Following today’s Nationwide House Price Index, that showed house price growth was largely static on a month to month basis, down -0.2% between June and July and that annually, house prices fell -3.8% versus this time last year. Industry experts have reacted and shared their thoughts with IFA Magazine.

Iwona Hovenko, real estate analyst at Bloomberg Intelligence, commenting on the latest house price data from Nationwide said:

“The 0.2% UK house price decline in July, according to Nationwide, may still represent a resilient outcome, especially against expectations for a 0.5% fall, given the rapid surge in mortgage rates which may have spooked many prospective homebuyers. Even the annual price drop of 3.8% – although the worst in 14 years – nevertheless remains somewhat modest against house prices still being 21% above their February 2020 level.”

“That said, the longer the mortgage rates remain near their current very high level – unseen since at least 2010 – the larger the potential damage inflicted on house prices and transactions going forward. Even the best-buy rates on the relatively cheaper five-year deals start at about 5.5% vs. sub-4% in early May, with cheapest two-year fixes available at about 6% (vs. just over 4% three months ago). Such high rates pose a threat to UK housing outlook and our previous expectations for a 5% decline in house prices in 2023.”

Director of Benham and Reeves, Marc von Grundherr, commented: “We’ve seen inflation ease in recent weeks, however, interest rates and the resulting cost of borrowing remain high and this is continuing to dampen buyer appetites, which in turn is impacting house prices. 

While we don’t anticipate any notable correction on the horizon, we expect these lethargic market conditions to remain in the short-term, until such time the cost of climbing the ladder starts to reduce.”

Ross Boyd, CEO, Dashly, says today’s Nationwide figures will scaremonger existing homeowners but first-time buyers and cash buyers are laughing:

“We have seen a definite cooling of the market over the last few months with transactions down, largely thanks to interest rate rises, and today’s price drop is the result of this thanks to less demand in the market as homeowners stay put and create little movement in the market. Many potential sellers and buyers are adopting a wait and see approach and this is causing a bottleneck.

“We wait to see what the Bank of England decide to do with base rates later this week, but we expect at least another 0.25% increase. What will that do for the market? We expect that we’re in for a slow second half to the year and the usual Autumnal surge will be somewhat quiet this year. A lot of this depends on what lenders decide to do with pricing. The next increase is already priced into fixed rates but those on variable rates will really be feeling it. SVR’s are an all-time high with average rates at 8.05% and any increases will be passed on.

“How they price their products is driven largely by the base rate, but there are many other factors they take into account too. There is some leeway there so the reality is that lenders could hold the key to helping build some momentum in the property market by keeping borrowing rates competitive.

“Being told your house is worth less than it was 12 months ago is quite a hard pill to swallow. But it’s all relative. Those looking to move may have to take the hit on the value of their property, but the home they want is likely to be reduced too. There are deals to be done and with more people considering downsizing, we’re likely to see it becoming a buyer’s market very quickly.

“First time buyers will find deals to be done – these buyers will find that although borrowing rates are higher than they have been for some time, the cost of a mortgage is still likely to be less or the same as renting.”

Stuart Collar-Brown, founder of My Auction and Assured Sales, says today’s Nationwide figures are confusing:

“Today’s figures from Nationwide are a bit misleading. Average prices are down 3.8% but we need to remember we have had a 24% increase in average house prices in the past 3 years compared with a 4.6% increase the 3 years preceding 2020 so we have to keep a level head and some perspective in today’s market.”

“It is a buyer’s market and we may find that house prices will continue to decline from the peak in October 2022. Buyers know they hold the power and have become far more savvy and willing to shop around for the best deals. The trouble is that we have seen artificially high house values for some time now and sellers who actually want to sell now have to be much more realistic with what is happening in the market.”

Managing Director of Barrows and Forrester, James Forrester, commented: “A gloomy market outlook on the face of it, but rather than entering a deep freeze, it’s fair to say the market is thawing. Yes, affordability remains an issue, however, just this week we’ve seen a big spike in mortgage market activity, which suggests that an uplift in house prices is just around the corner. 

As interest rates begin to reduce, this growing market momentum will start to snowball and this will reverse the downward house price trends of recent months.”

Managing Director of House Buyer Bureau, Chris Hodgkinson, commented: “The weakest level of annual house price growth since July 2009 is sure to cause alarm for the nation’s home sellers and many will be keen to sell their home quickly before the rot sets in any further. 

The good news is that we’re not in the midst of a market crash, albeit we are seeing a downward correction. However, the real challenge at present is the heightened level of market instability, the ability to actually find a buyer in a proceedable position and, once you have, making it through to completion without the transaction falling through.”

CEO of Octane Capital, Jonathan Samuels, commented: “The current market outlook isn’t quite as turbulent as today’s house price figures may suggest and, in fact, we’ve seen a boost to market sentiment in the form of mortgage approval activity outperforming wider expectations. 

While this increase in buyer appetites will take some time to filter through to top line house price growth, it’s certainly an early sign that the worst is behind us.”

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