UK House Prices Slide Again, The Fourth Consecutive Month of Decline

UK house prices declined for the fourth consecutive month in December, falling 0.1% month on month, although the decline slowed from the 1.4% decline in November.

The decline is the longest since 2008, at the end of the global financial crisis. The average house price in December was £262,068, down from £263,788 in November, with all regions recording a slowdown in annual price growth in the final quarter of the year.

The annual growth rate has cooled to 2.8% from 4.4% in November, the lowest since July 2020s 1.5% annual growth rate.

“While financial market conditions have settled, mortgage rates are taking longer to normalise and activity in the housing market has shown few signs of recovery,” commented Nationwide's Chief Economist Robert Gardner.

He added that it would be hard for the market to regain much of its momentum in the near term as economic headwinds increase. Real earnings are set to decline further, and the labour market is widely projected to weaken as the economy shrinks, explains Gardner.

Nationwide said the slowdown was most pronounced in the South West, which saw annual house price growth slow from 12.5% to 4.3%. However, it was the strongest-performing region last quarter. Meanwhile, East Anglia was the strongest-performing region over the year.

“The recent weakness in mortgage applications may, in part, represent an early seasonal slowdown. With the chaotic backdrop and elevated mortgage rates in recent months, it wouldn't be surprising if potential buyers have opted to wait until the New Year to see how mortgage rates evolve before deciding to step into the market,” added Gardner.

However, he believes that the main factor that would help achieve a relatively soft landing for house prices is if they can avoid forced selling. Nevertheless, he is optimistic, pointing to the unemployment rate and robust household balance sheets, which he believes have “significant protection from higher borrowing costs, at least for a period, with around 85% of mortgage balances on fixed interest rates.”

Following the report, shares in housebuilders such as Persimmon, Barratt Developments, and Taylor Wimpey have slipped.