House prices in the UK fell for the first time in 9 months

LONDON — U.K. house prices fell for the first time in nine months in December as the country’s budget and higher mortgage rates dampened recent homebuying activity.

Average house prices fell 0.2% between November and December – the first monthly drop since March – fresh data from lender Halifax showed on Tuesday. That was below forecasts of economists polled by Reuters for a 0.4% rise in prices.

This means that the average property value in the country has fallen slightly to £297,166 ($372,560).

Home prices rose 3.3% year-on-year in December, but annual price growth also fell from 4.7% in November and below the 4.2% forecast by economists.

Shares of British builders Taylor Wimpey, Persimmon, Bell tower and Barratt Redrow all fell after the release of data on Tuesday morning.

UK house prices rose steadily in 2024, increasing for five consecutive months after a brief period of stagnation as sentiment picked up amid the UK election and Bank of England opening rate cut cycle.

However, a cooling interest rate expectations — including on the other side of the government tax and expenditure budgetwhich pushed up borrowing costs in the UK — putting pressure on transactions for the rest of the year.

Amanda Bryden, head of mortgages at Halifax, said higher mortgage rates are likely to continue to weigh on the market in 2025, even if price growth remains “modest”.

“Mortgage affordability will remain an issue for many, particularly as Bank Rate is likely to come down more slowly than previously forecast,” Bryden said.

Tom Beale, head of UK residential research at Knight Frank, said the combined prints showed that volatility had begun to set in in the housing market after the government’s Oct. 30 budget cast doubt on the country’s value proposition. economic perspective.

“Some slowdown is inevitable because borrowing costs have gone up,” Bill said on CNBC’s “Street Signs Europe.”

Analysts now expect transactions to pick up in the early months of this year as upcoming changes to a key homebuyer tax motivate buyers and sellers.

The government announced the end of the pandemic land tax cuts in its budget, meaning buyers will face higher transaction costs from April 1.

“Stamp duty changes are undoubtedly a key demand driver at the moment supporting property values,” said Stephen Perkins, managing director of Yellow Brick Mortgages.

However, Beal noted that such an uptick in deals is likely to be short-lived, expecting a lull from the second quarter.

“The clock is ticking to some extent,” he said.

Following the Budget, Knight Frank has revised down its forecast for UK house price growth in November. Average home prices are now expected to rise by 2.5% in 2025 and 3% in 2026, compared with 3% and 4%, respectively, forecast in August.