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UK Housing Market Sees Sharpest Annual Price Drop in 14 Years: Halifax Report

House prices in the UK experienced another decline in August, with a significant drop of 4.6% compared to the same month in the previous year, according to data from the Halifax. The average cost of a house in August was £279,569 ($349,000), marking a decrease of about £5,000 from July, which equates to a monthly decline of 1.9%—the sharpest monthly drop since November of the previous year.

This annual decline of 4.6% represents the most substantial fall in 14 years, bringing house prices back to levels seen at the beginning of the previous year, as stated by the Halifax.

The Halifax acknowledged that the impact of higher mortgage costs may be contributing to this decline and that fluctuations in prices are expected when market activity is lower. However, they believe that the overall pace of decline aligns with their outlook for the entire year.

Although the Halifax anticipates further declines for the remainder of the year and into 2024, it’s worth noting that house prices are still approximately £40,000, or 17%, higher than pre-pandemic levels.

Despite recent comments from Bank of England governor Andrew Bailey suggesting that interest rates might be nearing their peak, analysts believe that the current mortgage rates are significantly higher than the lows observed in 2021 before the central bank initiated its rate hikes to combat inflation in December of that year. This situation poses an affordability challenge for both new and existing borrowers who must demonstrate their ability to meet higher repayment levels.

The Halifax’s findings align with those of the Nationwide building society from the previous week, which reported a 5.3% annual decline in house prices in August—a 14-year record drop once again. When these surveys are considered together, they suggest that the UK housing market may be on its way to the 10% decline that economists had forecast.

Due to the ongoing pressure on household budgets, an estimated 35% of individuals’ take-home pay is now being directed towards covering mortgage repayments, which could potentially lead to further issues later in the year and result in reduced market activity.

While London remains the most expensive place in the UK to purchase a home, with an average property price of £529,814, it has seen the largest cash decline of any UK region over the past year, with prices falling by 4.1%, equivalent to £22,777.