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Collapse of house prices in the UK: proportions and consequences

Collapse of house prices in the UK: proportions and consequences. The UK real estate market, historically known for its resilience and robustness, is currently undergoing a transformation that has left many players perplexed. With house prices showing a steady decline, the real estate landscape in the UK is being redrawn, raising concerns among investors, homeowners, and potential buyers.

According to the latest report from the Halifax credit group, a renowned name in the UK’s financial sector, housing prices in the country have decreased for the sixth consecutive month in September, with an average drop of 0.4%. This trend, which began in April, saw a less dramatic decrease compared to the 1.8% drop observed in August, but no less significant.

Even more alarming is the annual perspective. The data reveals a 4.7% decrease in house prices compared to the previous year. This drop is more pronounced than the 4.5% decrease recorded in August and represents the most significant annual downturn since the distant August 2009, when prices plummeted by 5.5%. As a result, the average cost of a house in the UK now stands at around 278,601 pounds, a figure reminiscent of the early months of 2022.

At first glance, these figures might seem less alarming, especially considering that prices are still 1% higher than in December 2021. This was the period when the Bank of England initiated a series of interest rate hikes. However, it is essential to underline that, despite everything, house prices remain almost 40,000 pounds above pre-pandemic levels.

But what is driving this continuous drop in house prices?

Several factors are at play. One of the main culprits is the rise in mortgage rates in 2022 and 2023. This has inevitably cooled the real estate market. And, although mortgage costs have recently recorded a reduction, demand from potential buyers remains weak, awaiting further rate cuts.

Kim Kinnaird, director of Halifax Mortgages, provided a perspective on this ongoing trend. She emphasized that “activity levels continue to appear modest compared to recent years.” This statement is further supported by industry data showing a decrease in the number of new instructions to sell houses and in agreed sales. Kinnaird highlighted how financing costs are the main driving force behind these changes in the real estate market.

In this scenario, homeowners are adopting a more pragmatic approach regarding selling prices. The real estate market is transforming into a buyer-dominated market, where the latter have an advantage in negotiations. Faced with these changing market dynamics, sellers are revising their price expectations downwards.


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