Uncontrolled collapse in house prices intensifies in UK
2023.02.01 11:05
Uncontrolled collapse in house prices intensifies in UK
By Ray Johnson
Budrigannews.com – Following a rise in borrowing costs and broader inflation pressures, mortgage lender Nationwide Building Society reported on Wednesday that British house prices fell by more than expected by 0.6% in January and are currently 3.2% below their peak in August.
The fall in house prices in January was the fourth in a row, the longest streak of declines since 2009, and it was twice as big as economists expected in a Reuters poll, indicating that the market is slowing down quickly.
The largest price decline since April 2009 occurred in the three months prior to January, when prices were down 2.3% compared to the previous three months.
Due to former prime minister Liz Truss’s “mini budget,” which sent market interest rates soaring in late September and October, the mortgage market experienced significant disruption. Interest rates have increased significantly since December 2021.
Robert Gardner, chief economist for Nationwide, stated, “It will be difficult for the market to regain much momentum in the near term as economic headwinds are set to remain strong, with real earnings likely to fall further and the labor market widely projected to weaken as the economy shrinks.”
In December, it was predicted that house prices would fall 5% in 2023 nationwide.
According to Nationwide, house prices increased by 1.1% in January, the smallest increase year-over-year since June 2020 and down from a 2.8% increase in December. Reuters polled economists who anticipated a rise of 1.9 percent.
During the COVID-19 pandemic, British house prices soared by more than a quarter, aided by extremely low interest rates, tax incentives, and the demand for more living space during lockdown, which was also seen in other Western nations.
However, the mini-budget’s disruption of lending has accelerated the reversal of the boom.
The number of mortgages approved in December fell to its lowest level since the global financial crisis, when strict lockdown restrictions were in place during the COVID-19 pandemic, according to a Tuesday report from the Bank of England.
After the mini-budget, Gardner stated that the fall reflected a decrease in mortgage applications and that it was too early to determine whether the volume of home purchases would recover.
