The latest Nationwide house price index shows that house prices have started to drop for the first time in eight years. Despite optimism from estate agents of a quick bounce back, it seemed inevitable that we’d see a decrease sooner or later.
Nationwide’s June house price report was the bearer of bad news this week. It revealed that house price growth has ground to a halt.
It was the bad news we have been waiting to be confirmed since the pandemic began.
Nationwide House Price Index
For the first time since 2012, annual house price growth fell into negative figures. Prices in June were down by 0.1 per cent annually, and down by 1.4 per cent monthly.
Average house prices were hovering at £218,902 in May. However, June saw this drop to £216,403.
‘It is unsurprising that annual house price growth has stalled, given the magnitude of the shock to the economy as a result of the pandemic,’ says Robert Gardner, Nationwide’s Chief Economist.
Economic output fell by 25 per cent between March and April. That is four times more than during the financial crisis.
The housing market also slowed down due to lockdown measures. In May property transactions were 50 per cent below the same time last year.
‘With lockdown measures due to be eased in the weeks ahead, housing market activity is likely to edge higher in the near term, albeit remaining below pre-pandemic levels,’ Robert Gardener adds. ‘Nevertheless, the medium-term outlook for the housing market remains highly uncertain.’
Nationwide and other estate agents are still optimistic that the damage to the housing market will not be long-term. This is largely due to the raft of policies that have been adopted to support the economy.
‘These same measures should also help ensure the impact on the housing market will ultimately be less than would normally be associated with an economic shock of this magnitude,’ says Robert Gardener.
James Forrester, managing director of Barrows and Forrester agrees: ‘With the government also making the property market a primary focus of their broader recovery plan, this decline should be a short term one indeed. With any long term damage unlikely to materialise.’