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In August, British property values experienced their most significant yearly drop since July 2009, with a 5.3% decrease compared to the previous year. This decline was primarily attributed to increased interest rates, which dampened buyer demand, according to mortgage lender Nationwide. Additionally, there was a substantial monthly decline of 0.8% in August, the sharpest monthly decrease since March, as indicated by Nationwide’s data.
The Bank of England has implemented 14 interest rate hikes since December 2021, bringing them to 5.25%. Financial markets anticipate yet another rate increase this month, pushing it to 5.5% Mortgage approvals had consistently remained approximately 20% lower than the levels observed in 2019, and it appears that this trend will persist.
However, Nationwide anticipates that the housing market will experience a gradual decline rather than a sharp drop, describing it as a “soft landing.” This expectation is based on their projection that unemployment will not surpass 5%, and nominal wage growth is strong.
Prior to reaching their peak in September 2022, British house prices had surged by more than 25% since the start of the COVID-19 pandemic, driven by increased demand for larger living spaces, historically low interest rates, and temporary tax incentives.
A recent Reuters survey of economists and property analysts, released before the Nationwide data, indicated that participants anticipated a 4% decrease in house prices for 2023 when compared to 2022. This prediction was slightly higher than the 3% estimate from a similar survey conducted in June. The most pessimistic forecast in the poll projected a 10% decline. Looking ahead, respondents in the poll expected house prices to remain stable in 2024 and then increase by just over 3% in 2025.
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