The UK housing market is experiencing its most significant contraction since the financial crisis, with new figures from Halifax revealing a dramatic 2.6% quarterly price drop - the steepest decline since 2011.
Market Downturn Accelerates
According to the latest Halifax House Price Index, property values fell by 0.4% in September alone, marking the sixth consecutive monthly decrease. The annual rate of growth has now slowed to just 7.2%, down from July's peak of 11.4%, signalling a rapid cooling of the previously red-hot market.
Flats Bear the Brunt
Detached properties have shown remarkable resilience, maintaining nearly all their pandemic gains with prices up 23.1% since March 2020. In stark contrast, flats have significantly underperformed, recording a mere 10.4% increase over the same period.
'The significant drop in quarterly house prices points to a market undergoing a rapid re-adjustment,' noted Kim Kinnaird, Director at Halifax Mortgages.
Mortgage Costs Squeeze Buyers
The dramatic shift follows the Bank of England's aggressive interest rate hikes, with the base rate now standing at 2.25%. This has translated into substantially higher mortgage costs for prospective buyers, with average two-year fixed rates approaching 6%.
First-time buyers face particular challenges, with affordability constraints becoming increasingly severe amid the cost of living crisis and rising borrowing costs.
Regional Variations Persist
While the slowdown is nationwide, Wales continues to show the strongest annual growth at 14.8%, though this represents a notable cooling from previous months. London remains the weakest performer with just 6.4% annual growth, reflecting its higher average property prices and greater sensitivity to economic pressures.
Outlook Remains Uncertain
Industry experts predict further price declines as the market adjusts to the new economic reality. With mortgage approvals already falling and buyer demand softening, the traditional autumn selling season faces unprecedented headwinds.
The combination of economic uncertainty, rising living costs, and more expensive borrowing suggests the property market downturn may have further to run.
