Property prices drop again in February

Nationwide recorded a sixth consecutive monthly price fall, marking the first 12 month annual decline since the onset of the Covid pandemic. How much further might they go?

Prices fell by 0.5% last month, marking a decrease of 1.1% year-on-year and the weakest level of growth since 2012. This is the sixth monthly decline in a row, and leaves prices 3.7% below their August 2022 peak.

Nationwide's figures for February

.

February 2023

January 2023

Monthly change

-0.5%

-0.6%

Annual change

-1.1%

+1.1%

Average price

£257,406

£258.297

Robert Gardner, chief economist, Nationwide

"The recent run of weak house price data began with the financial market turbulence in response to the mini-Budget at the end of September last year. While financial market conditions normalised some time ago, housing market activity has remained subdued.

"This likely reflects the lingering impact on confidence as well as the cumulative impact of pressures that have been weighing on households for some time. Indeed, inflation has continued to outpace wage growth and mortgage rates remain significantly higher than the lows recorded in 2021. Even though consumer sentiment has improved in recent months, it is still languishing at levels prevailing during the depths of the financial crisis."

Outlook

A Reuters poll of 10 'housing market experts' held in mid-February arrived at a prediction of a 2.4% fall in house prices this year. This seems somewhat optimistic when compared to an RICS member survey, also in February, whose consensus was a peak to trough decline of 8%. Given that prices have already declined by c. 3.5% since the August peak, RICS's poll suggests that there is another 4% to 5% to go. Much will depend on the Bank of England's next base rate decision and whether employment levels remain firm during the coming months.