House prices suffered their biggest monthly drop in November in over a decade as the cost-of-living crisis spooked the housing market.
The average asking price for a UK home fell by 2.1% in the last month to £359,137, according to Rightmove, in what has been noted as the largest pre-Christmas dip in four years. It comes after Halifax said prices had suffered the biggest monthly drop since 2008 in November, as consumer demand fell.
Buyer demand has dropped 20% compared to last year, as consumers battle a combination of high inflation, the rising cost of living and a fall in wages, with the Office for Budget Responsibility forecasting a 7.1% drop in real disposable income over the next two years.
Meanwhile interest rates have rapidly risen alongside mortgage prices, with the fallout from September’s ‘mini-Budget’ prompting large lenders including Natwest, Barclays, Halifax and Virgin Money to pull deals and replace them with higher prices.
Despite the average cost of fixed-rate mortgages edging down from its peak in the wake of Chancellor Jeremy Hunt’s Autumn statement and the UK economy faring better than expected, property expert Simon Bath, CEO of iPlace Global, said house prices will need to fall further for buyers to get a shoe in the market.
Bath said: “At this point in time, the housing market is extremely sensitive. Homeowners and landlords have had to make big, reactive decisions within extremely short periods of time and now the future of the market hinges on consumer confidence, as well as the level of stock.
“Whilst this month’s house price fall will come as welcome news for prospective first-time buyers, there are still some potential hurdles that remain such as saving for a deposit amidst rising living costs and interest rate increases pushing up mortgage repayments. On the other hand, we have sellers who may be looking to upsize or downsize but are having to lower their asking prices due to a drop in demand, creating this tug of war market where both parties aren’t having their demands met.”
Bath says there could be a gradual tilt towards a buyers’ market in some regions of the UK as stock levels continue to slowly recover, with reports suggesting that the number of homes on the market is now at the highest level since March 2021. However, Bath notes that the end of December and January will be a telling time for the housing sector in terms of demand.
“My suggestion for all prospective buyers who are currently renting is to wait until the new year. As we approach Christmas, we return to a quiet time in the market as people spend more time with their friends and family. Transactions become less of a priority during the winter and then ramp up again in spring.
“I think that the first half of next year could be quite tough for the housing market in general due to the sharp rise in mortgage repayments – families are definitely going to feel this the most. It’s important for the government to look at the state of the market and introduce new schemes to support both aspiring buyers and existing homeowners so that the dream of owning a home doesn’t become even more unattainable than it already is for many.”
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