UK house prices fall 1.1% in February - Nationwide

UK house prices fell by 1.1% year-on-year in February, the first annual decline since June 2020, mortgage lender Nationwide said on Wednesday.

Prices also fell 0.5% month-on-month, marking the sixth consecutive monthly drop and the longest period of successive falls since February 2009 when banks caused the financial crash, according to the building society’s key index. Across the UK, the average house price in February was £257,406.

Prices are now 3.7% lower than their peak last August, and February’s negative annual price growth was the weakest seen since November 2012, Nationwide added. The year-on-year growth rate was negative for only the second time since February 2013; the other occasion was June 2020.

“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,” said Nationwide’s chief economist Robert Gardner.

“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.”

There was no sign of recovery in the near-term, Gardner added, with the labour market widely expected to weaken as the economy shrinks in the quarters ahead, while mortgage rates remain above the lows seen in 2021.

Gabriella Dickens, senior economist at Pantheon Macroeconomics said the fall "shows that elevated mortgage rates and the gloomy economic backdrop still are deterring buyers".

"Nationwide’s data chimes with other timely indicators. While Rightmove’s measure of asking prices held steady on the month in February, it is not seasonally adjusted; it was the worst February outturn since records begin in 2002. Our seasonally-adjusted measure fell by 1.2% month-to-month," Dickens said.

"And while our seasonally-adjusted Rightmove index is only 1.3% below its November peak, sellers increasingly are accepting offers below asking price. Indeed, 73% of homes were sold under the asking price in January, well above the average over the past two years, 35%, according to the NAEA. More recently, data from Zoopla show that sellers are having to accept offers an average of 4.5% below the asking price, the most for five years."

"Looking ahead, we still expect house prices to fall over the coming months until they are about 8% below their peak. Mortgage rates appear to have hit a floor for now, and households’ real disposable incomes will be squeezed again in April by the withdrawal of energy price subsidies by the government."

"In addition, expectations among the public that house prices will fall sharply are well-entrenched—62% of households expressing a view expected house prices to drop by at least 5% over the next year, according to the BSA’s Q4 Property Tracker Survey—suggesting demand won’t recover until a significant drop has materialised. We have tentatively pencilled-in a 5% rise in house prices for 2024, however, reflecting our view that the MPC will start to reduce interest rates next year."

Reporting by Frank Prenesti for Sharecast.com