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UK house prices fell at the fastest pace in more than a decade in November, driven by a sharp decline in London, according to official data reflecting the impact of rising interest rates on the property market.
The Office for National Statistics said on Wednesday that average prices shrank 2.1% in the year to November 2023, compared with a 1.3% fall in the 12 months to October and the biggest annual decline since June 2011.
House prices fell by 0.8 per cent between October and November, bringing the average property to £285,000, around £6,000 less than it was in November 2022.
London was the worst performing region in the UK, recording an annual contraction of 6 per cent, the largest since 2009. But the capital remained the most expensive part of the country, with the average cost of a home standing at £505,000.
The price decline reflects the impact of higher mortgage rates on the housing market after the Bank of England raised interest rates from a record low of 0.1 per cent in November 2021 to a 15-year high of 5.25 per cent in an attempt to tame the rise. Economic inflation.
Jeremy Liff, a London estate agent and former chairman of the Royal Institution of Chartered Surveyors, said the ONS data was the most comprehensive of all the surveys because it includes cash and mortgage transactions, but reflects market activity at least a few months ago.
“At the time, buyers and sellers were reacting to uncertain economic times before inflation and mortgage rates began to stabilize and decline,” he said. “On the ground, the situation is different now with early signs of improved confidence, which is translating into more views and offers.”
This month, mortgage providers cut interest rates on a range of products on expectations that the Bank of England will start cutting interest rates sharply this year. This boosted mortgage approvals and led to higher house price indices in Halifax and nationally.
According to data released on Thursday by Rics, most UK estate agents in December expected an expansion in sales next year, marking the second straight month of positive sentiment on the measure.
Figures from the professional body also showed the lowest negative house price assessment since November 2022.
“Supported by the recent easing of mortgage interest rates, buyer demand has now stabilized, and this is expected to translate into a slight rebound in residential sales volumes over the coming months,” said Tarrant Parsons, an economist at the REX Institute.
However, the RIC data was collected before an unexpected rise in UK inflation to 4 per cent in December, prompting traders to scale back their expectations for a rate cut from the Bank of England this year.
Higher inflation “may mean we get a pause in inflation [mortgage rate] “There is a possibility that some better deals will happen sooner rather than later,” said Sarah Coles, head of personal finance at investment platform Hargreaves Lansdowne.
Gabriella Dickens, an economist at consultancy Pantheon Macroeconomics, said that because the ONS measure lags behind data from Nationwide – which reported a peak annual decline of 5.3 per cent in September – “it is unlikely to represent… November is the lowest point on the official scale.”
“We continue to expect a 5 per cent peak-to-trough decline in the official house price measure, with the trough achieved at the end of the first quarter.” [2024]She said.
The ONS House Price Index covers deals completed in November that may have been agreed several months earlier, while the Halifax and Nationwide reports house prices for deals agreed that month.
The statistics agency said house prices fell in England but rose in Scotland and Northern Ireland during the year to November. Among all property types, terraced homes recorded the largest annual price decline of 3.8 per cent.
In separate figures released on Wednesday, the Office for National Statistics said UK rental prices rose by 6.2 per cent in the 12 months to December 2023. The reading was unchanged from November, the highest combined annual percentage change since data collection began in January 2016.
Experts said the lack of supply has led to higher rental prices, along with rising interest rates and increased demand for rentals as purchasing has become more difficult.
Tom Bell, head of UK residential research at estate agency Knight Frank, said: “Reduced supply continues to cause financial pain for tenants, as it continues to put strong upward pressure on rents.”
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