Halifax HPI: Prices fall even before September’s chaos

In September, house prices were up 9.9% in  year. It’s the first time that annual rises have been in single digits since January. Prices were down 0.1% in a month. The average price fell back very slightly to £293,835, from the previous month’s record high of £293,992.

Annual price growth has been gradually easing, after hitting 12.5% in June. Since the start of the pandemic, average house prices are still up 23% (almost £55,000).

The Halifax House Price Index for September was released today: september-2022-house-price-index.pdf (halifax.co.uk)

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown said: “House prices fell slightly last month, reflecting the fact that demand was already falling earlier this summer – well before the mini-budget tipped the mortgage market into chaos. Once September’s rate hikes feed through into sales figures in the coming months, the risks of more significant house price falls will build.

It’s not a big month-on-month fall, but it’s the second in three months, and the quarter has seen the slowest growth in a year, so we’re definitely seeing a cooling in the market. September prices reflect decisions in June, when estate agents were reporting lower demand for the second consecutive month, and sales were slowing. In the RICS residential market report at the time, there were plenty of comments from agents who saw buyers start to drift away, and those who remained were more cautious.

The chaos unleashed on the mortgage market last month will take its toll towards the end of the year and into the beginning of 2023. Rapidly rising interest rate expectations have pushed up mortgage costs so dramatically that we can expect it to depress demand. It will force some people to think twice about whether they can afford the home they need, and while others will still be keen, they may struggle to find someone willing to lend to them. Those who are remortgaging may also run into difficulties if their rate has shot up, and over time we are likely to see more people being forced to sell up and downsize.

The sudden withdrawal of mortgages and the overnight hiking of rates also came as a horrible shock to homeowners and buyers. Owning a property always means running the risk that the value of your property will fall, but this suddenly felt far more tangible. This is going to have an impact on sentiment – which is such a key factor in the property market.

Without positive sentiment, it’s far more difficult to see the market defying the cost-of-living crisis. There are still some forces helping to hold prices up, including low stock levels, a robust labour market and stamp duty cuts. But despite all of them, it’s hard to see the market not softening from here, and the risks of house price falls have risen significantly.

Of course, the lag in the sales process means we may not see this feed into the figures for weeks. Mortgage approvals for future purchases rose in August, so those sales will still need to filter through. However, it’s more likely than ever that the market may be entering its Wile E Coyote phase, as it treads water in mid-air and looks down.”