UK house prices fall for first time in 9 months

LONDON — House prices in the U.K. fell for the first time in nine months in December as the country’s balance sheet and higher mortgage rates dampened a recent flurry of home-buying activity.

Average house prices fell by 0.2% between November and December – the first monthly drop since March – fresh data from lender Halifax showed on Tuesday. That was below the 0.4% price increase expected by economists polled by Reuters.

It means that the average property value in the country has fallen slightly to £297,166 ($372,560).

House prices rose 3.3% year-on-year in December, but annual price growth was still down from 4.7% in November and below the 4.2% expected by the economists

UK house builders stocks Taylor Wimpey, Persimmon, Bellway and Barratt Redrow it all came crashing down after the release of data on Tuesday morning.

UK house prices rose at a steady pace in 2024, rising for five consecutive months after a brief lull as sentiment rebounded on the back of the UK election and ​The beginning of the Bank of England. rate cut cycle.

However, a cooling of interest rate expectations – even in the back of the government fiscal budget and expenseswhich pushed up borrowing costs in the UK – putting pressure on transactions towards the end of the year.

Amanda Bryden, head of mortgages at Halifax, said higher mortgage rates are likely to continue to weigh on the market in 2025, even as price growth remains “modest”.

“Mortgage affordability will remain a challenge for many, especially as the bank rate is likely to fall more slowly than previously expected,” said Bryden.

Tom Bill, head of UK residential research at Knight Frank, said the combined prints showed that wobbles had begun to emerge in the housing market after the October 30 budget government has cast doubt on the country. economic perspective.

“Some sort of slowdown is in place inevitably, due to the fact that borrowing costs have increased,” Bill told CNBC’s “Street Signs Europe.”

Analysts now expect transactions to pick up in the early months of this year as upcoming changes to a key homebuyer tax motivate buyers and sellers.

The government announced the end of a pandemic-era reduction in Stamp Duty Land Tax in its budget, meaning buyers will be subject to higher transaction costs from 1 April.

“Stamp duty changes are undoubtedly a key driver of demand at present, supporting property values,” said Stephen Perkins, chief executive of Yellow Brick Mortgages.

However, Bill noted that such business growth was likely to be short-lived, expecting a lull from the second quarter onwards.

“There is a clock to some extent,” he said.

After the budget, Knight Frank has revised its forecast of growth in the price of real estate in the United Kingdom in November. It now expects average property prices to rise 2.5% in 2025 and 3% in 2026, from 3% and 4%, respectively, expected in August.