The Nationwide house price index shows that house prices were down 1.1% year-on-year in February, with prices 3.7% lower than the August 2022 peak.
This was the first annual decline since June 2020 and the weakest since November 2012, the Nationwide said. The average house prices is now £257,406.
Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said: “The recent run of weak house price data began with the financial market turbulence in response to the mini-Budget at the end of September last year. While financial market conditions normalised some time ago, housing market activity has remained subdued.
“This likely reflects the lingering impact on confidence as well as the cumulative impact of the financial pressures that have been weighing on households for some time. Indeed, inflation has continued to outpace wage growth and mortgage rates remain significantly higher than the lows recorded in 2021. Even though consumer sentiment has improved in recent months, it is still languishing at levels prevailing during the depths of the financial crisis.
“It will be hard for the market to regain much momentum in the near term since economic headwinds look set to remain relatively strong, with the labour market widely expected to weaken as the economy shrinks in the quarters ahead, while mortgage rates remain well above the lows prevailing in 2021.
“Indeed, despite the modest fall in house prices, for a prospective first-time buyer earning the average income looking to buy the typical home, mortgage payments remain well above the long run average as a share of take-home pay. In addition, deposit requirements remain prohibitively high for many and saving for a deposit remains a struggle given the rising cost of living, especially for those in the private rented sector, where rents have been rising strongly.
“However, conditions should gradually improve if inflation moderates in the coming months as expected, easing pressure on household budgets. Solid gains in nominal incomes together with weak or declining house prices will also support housing affordability, especially if mortgage rates edge lower in the coming months.”
Nicky Stevenson, managing director at national estate agent group Fine & Country, said aslowdown in prices in February “is not unsurprising given normal seasonal trends”, but she added spring is traditionally busy – “we are seeing an increasing number of buyers are being enticed back to the market”.
She added that data released earlier in the week showed the average house price had risen by 20% since the start of 2020, representing a £50,000 rise — “an astonishing increase compared to the 7.8% increase in the three years prior.
“A slowdown in price growth is therefore playing a part in drawing prospective buyers back to the market, as they are keen to try to secure a good deal on their next home.
“An improving and increasingly competitive mortgage market is equally giving people more confidence and is already helping with affordability.”
