Key events
Here’s some instant reaction to the annual drop in house prices.
Tom Bill, head of UK residential research at Knight Frank, said:
While most of the economy has moved on from the mini-Budget, the hangover is longer for the UK housing market. It has led to a mismatch between the most recent anecdotal evidence and the latest data. While last month saw the steepest annual house price decline in more than ten years, activity has been solid so far this year as buyers and sellers adapt to higher mortgage rates.
We expect transaction levels to fall from the heights of the pandemic and prices to decline by 5% this year but the UK housing market is far from being on its knees.
John O’Malley, director of Scotland-based estate agents O’Malley, which has branches in Alloa, Edinburgh, Stirling and West Lothian, said:
When you look at the broader economic backdrop, it’s no surprise both monthly and annual price growth are now in the red. Buyers are wary and many sellers are struggling to come to terms with the fact that their properties are no longer worth what they were six months ago. 2023 will be a tough year for many households and the property market will not be protected from the ongoing cost of living crisis and higher mortgage rates.
Buyer demand has dropped for ten consecutive months and may continue to fall as people start to consider alternative, more affordable accommodation. It is not unusual to see a drop in both supply and demand in February as buyers and sellers alike batten down the hatches and wait for the spring. However, this February, the demand for property was almost half that of last year, while the supply of property was also weaker than usual.
Introduction: Annual house price growth turns negative, falling to weakest level since 2012
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Annual house price growth has moved into negative territory for the first time since June 2020, Nationwide building society said this morning.
The average price of a home declined by 1.1% year-on-year to £257,406 in February, the weakest rate since November 2012. In January, the annual rate showed 1.1% growth.
Prices fell 0.5% compared with January, following a 0.6% drop the month before. It was the sixth monthly decline in a row, and left prices 3.7% below their peak in August.
Robert Gardner, Nationwide’s chief economist, said:
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 the financial 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.
It will be hard for the market to regain much momentum in the near term since economic headwinds look set to remain relatively strong, with the labour market widely expected to weaken as the economy shrinks in the quarters ahead, while mortgage rates remain well above the lows prevailing in 2021.
In another sign that the housing market has slowed sharply, Persimmon, one of the UK’s biggest housebuilders, warned of lower profits this year and slashed its dividend by 75%. It made an underlying pre-tax profit of £1.01bn last year, up 4%.
There’s a slew of other data out today, and Bank of England governor Andrew Bailey will be speaking at a cost of living conference organised by the Brunswick Group and hosted at Coin Street Social Enterprise in London later this morning.
The latest quarterly FTSE reshuffle is expected to lead to the greeting cards retailer Moonpig and the betting firm 888 being relegated from the FTSE-250 index to the FTSE small cap.
The Scottish sausage skin manufacturer Devro may briefly enter the FTSE 250 after “a banger of a performance for shares” which surged following a cash offer for the company, said Susannah Streeter, head of money and markets at Hargreaves Lansdown. The results of the reshuffle, based on yesterday’s closing prices, will be announced later today, probably this afternoon.
The Agenda
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8.15am GMT – 8.55am GMT: Spain, Italy, France and Germany S&P Global manufacturing PMIs for February
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8.55am GMT: Germany unemployment for February
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9am GMT: Eurozone S&P Global manufacturing PMI final for February
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9.30am GMT: UK Mortgage approvals and consumer credit for January
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9.30am GMT: UK S&P Global manufacturing PMI final for February
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10.10am GMT: Bank of England governor Andrew Bailey speech
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11am GMT: Italy GDP growth for 2023 (previous: 6.6%)
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1pm GMT: Germany inflation for February
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3pm GMT: US ISM Manufacturing PMI for February (forecast: 48)
