House prices fall in largest annual drop since 2009 as inflation and higher borrowing costs dampen property market
House prices fell 3.1 per cent in March, the largest annual decline since July 2009 as consumer confidence remained weak and household budgets came under increasing pressure from high inflation.
According to data from Nationwide, East Anglia, which was the strongest performing region last quarter, saw a significant slowdown, with prices falling 1.8 per cent year-on-year, making it the weakest performing English region.
As the market continues to pick up the pieces from September’s mini budget, the outer South East region saw house prices decline 1.5 per cent year-on-year, while in London they fell 1.4 per cent fall – with the average price of a house in the capital now £511k.
“The housing market reached a turning point last year as a result of the financial market turbulence which followed the mini-Budget. Since then, activity has remained subdued,” said Robert Gardner, Nationwide’s chief economist.
The fall in house prices has not been matched by a fall in borrower demand as mortgage approvals have improved for the first time since August.
According to the latest Bank of England’s Money and Credit report for February, net mortgage approvals for house purchases increased to 43,500 up from 39,600 in January – however still remained below pre-pandemic levels.
Tom Bill, head of UK residential research at Knight Frank, said: “Activity has been solid this year as buyers accept the new normal for mortgage rates. For anyone with memories that stretch further back than 2008, it looks very much like the old normal.
“That said, more financial pain will enter the system as owners move onto higher fixed-rate deals and combined with an increase in supply from the lows of the pandemic, we expect UK prices to fall by a few percent this year.”
Matthew Thompson, head of sales at Chestertons, added: “House hunters may not be seeing the drop in London property prices that they had hoped for.
“In March, the average price at which properties sold via our branches stood at £1.37mn with neighbourhoods such as Putney, Fulham and Barnes being in particularly high demand with buyers.