UK house prices fall by most since 2009

LONDON, Sept 1 (Reuters): British house prices in August were 5.3 per cent lower than a year earlier, their biggest annual decline since July 2009 as higher interest rates reduced demand from buyers, mortgage lender Nationwide said on Friday.
Prices dropped by 0.8 per cent in August alone, the largest monthly fall since March, after a 0.3 per cent decline in July, Nationwide's figures showed.
"The softening is not surprising, given the extent of the rise in borrowing costs in recent months, which has resulted in activity in the housing market running well below pre-pandemic levels," Nationwide Chief Economist Robert Gardner said.
The Bank of England has raised interest rates 14 times since December 2021 to 5.25 per cent, and financial markets expect another rate increase this month to 5.5 per cent.
Mortgage approvals had been running around 20 per cent below 2019 levels, a trend which looks likely to continue, Gardner said.
Nonetheless, Nationwide expects a "soft landing" for the housing market as it predicted unemployment would not rise above 5 per cent and wages were growing fast in nominal terms.
Speaking later to the BBC, Gardner said this implied a further fall of only 1 per cent or 2 per cent.
However Andrew Wishart, senior property economist at Capital Economics, said he expected house prices had another 5 per cent to fall, taking the total peak-to-trough decline to 10.5 per cent.
"We think the August data marks the start of a significant further drop in house prices," he said, pointing to weakness in the latest Royal Institution of Chartered Surveyors survey, which shows the most widespread price falls since 2009.
Before they peaked in September 2022, British house prices had surged more than 25 per cent since the start of the COVID-19 pandemic, boosted by greater demand for living space, previously low interest rates and temporary tax incentives.