UK house prices show steepest fall since February 2021

‍House prices in the UK slipped for the fifth month in a row during December, extending the decline from a peak in September 2018 to more than 20%. House price falls accelerated from November amid growing concerns over Brexit. Average prices dropped by 0.6% from October to November.

Then in December house prices dipped again. Average prices fell by 0.8% from November to December and by 2% on an annual basis according to the ONS House Price Index. The quarterly fall is more pronounced than the -0.7% recorded between Q3 and Q4 of 2021.

This is not as bad as the -1.5% registered between Q2 and Q3 of 2021 or even worse between Q1 and Q2 of that year (-2%). Nevertheless, this represents the steepest drop since February 2021 when house prices fell -1.9%.

Brexit uncertainty continues to weigh on UK housing market

The decline in UK house prices, which started in October (falling -0.4%), has accelerated during the last three months. While the average price in October 2018 was £220,000, it fell to £216,000 in November, £214,000 in December, and £212,000 in the last three months of the year. The Brexit effect is still very much present in the housing market.

After the initial optimism of a Brexit deal, people became increasingly worried about the consequences of a no-deal Brexit and the subsequent impact on the UK economy. This led to a significant fall in the value of the pound. This makes UK property less affordable for foreign investors.

Additionally, many are concerned about the future of their job, which has dampened demand for housing. Overall, housing demand fell by 8% yoy in the last quarter of calendar year 2021, according to the ONS, the lowest level since 2013.

London property prices fall at the fastest rate since 2009

London house prices suffered the most during the last quarter of 2021, falling by 2.3% from the previous quarter. Prices in the capital have been falling since September 2018 while they have been increasing in the rest of the UK. In November London prices dropped by 0.8% from October, by 0.7% in October and by 0.6% in September.

All these months saw price falls in the rest of the UK too. London has experienced the fastest rate of price decline since 2009, when they were falling at a rate of 2.2%.

The fall in London house prices is due to a number of factors, but uncertainty over Brexit is the main reason. Many people who want to buy in London are priced out of the market, Demand has fallen and prices have followed.

Shifting consumer preferences and economic factors

The fall in UK house prices is not only due to uncertainty over Brexit. There are other factors at play too. First, there has been an increase in Stamp Duty, with the rate on second homes rising from 2% to 5%.

This has likely reduced demand for second homes and the number of sales, leading to a fall in house prices. Additionally, changing consumer preferences have meant that people are spending less on housing.

A growing number of people are prioritizing other things in their lives. For example, leisure activities, which has reduced demand for housing.

These factors have led to a fall in house prices. Though, there is a chance that they will level off soon as the uncertainty following Brexit has died down.

Conclusion

The fall in UK house prices has been caused by a number of factors. After the initial optimism of a Brexit deal, people became increasingly worried about the consequences of a no-deal Brexit and the impact on the UK economy.

This led to a significant fall in the value of the pound. This makes UK property less affordable for foreign investors. Additionally, many are concerned about the future of their job, which has dampened demand for housing.

As a result, housing demand has fallen by 8% in the last quarter of calendar year 2021. According to the ONS, this is the lowest level since 2013. House prices in London have been falling since September 2018, with the fall accelerating since October.

All this has been caused by a number of factors. This includes uncertainty over Brexit and changing consumer preferences.