On Friday, UK mortgage lender Nationwide revealed that the British real estate market is sliding at an accelerating rate, with home prices in August falling at the sharpest yearly rate seen since the depths of the global financial crisis.
In the steepest fall since July of 2009, the prices of housing fell 5.3% in August. Soaring mortgage costs received most of the blame for the drop, as they reduced the demand from buyers, according to the lender. Property prices declined by 0.8% over the month in August, which brought the average property value to £259,153 ($329,000) or roughly £14,600 ($18,500) less than the peak in August of 2022.
Robert Gardner, the chief economist at Nationwide said, “The softening is not surprising given the extent of the rise in borrowing costs in recent months, which has resulted in activity in the housing market running well below pre-pandemic levels.”
The prices of residential homes hit their peak in August of 2022, as the effects of the pandemic came to a close, demand soared due to low interest rates and temporary tax incentives. Since then, soaring borrowing costs due to rising interest rates have weighed down UK households, which were already struggling with a burgeoning cost of living crisis driven in large part by soaring energy costs.
Andrew Wishart, senior property economist at Capital Economics, said, “We think the August data marks the start of a significant further drop in house prices.”
According to recent data from the real estate company Zoopla, as a result of the soaring mortgage costs, UK home sales are falling to their lowest levels since 2012. Year over year, sales are forecast to fall by 21% to roughly 1 million this year.
Tomer Aboody, a director of the property lender MT Finance said, “Constant interest rate rises are making affordability difficult for buyers who are trying to move, with many having little option but to wait until rates settle.”
There was also a steep drop in the volume of home sales, according to the Nationwide report. According to their data, completed housing transactions dropped nearly 20% below 2019’s reading, and 40% beneath the reading for the first half of 2021.
