More than 11 million UK homes have declined in value since the end of last year, as pricey mortgages wreak havoc on the nation’s real estate market.
(Bloomberg) — More than 11 million UK homes have declined in value since the end of last year, as pricey mortgages wreak havoc on the nation’s real estate market.
Some 38% of homes lost at least 1% in value between November and May, according to estimates from property portal Zoopla. These properties lost an average of £7,700 ($9,788). It’s up from 18% of homes losing value in the 12 months to May, suggesting the impact of rising rates is starting to weigh on prices.
“The housing market registered a drop in house prices over late 2022 and early 2023 as the market adjusted to mortgage rates hitting 6%,” said Richard Donnell, executive director at Zoopla. “This has led to price reductions for almost four in 10 homes in the last six months, typically larger homes at higher prices.”
The UK housing market is under pressure from a triple whammy of pricey borrowing, economic uncertainty and the worst cost-of-living crisis in a generation. The average two-year and five-year fixed-rate mortgages have both surged above 6% this summer, edging closer to the 14-year peak reached at the end of 2022.
Meanwhile, a regional divide in the movement of home values is emerging. Almost half of households in northern England, Wales, and the Midlands saw the value of their property increase in the last six months, compared with just a fifth of homes in London and the south east of England where valuations are already far higher, according to Zoopla. The firm warned that national house price averages can be “dangerous when used to make decisions on individual properties.”
Still, two thirds of homeowners saw their property value increase by at least 1% in the 12 months to May, with an average gain of £7,000, the report said. However, that figure tumbled to less than a third between November and May, after September’s ill-fated government mini-budget spooked markets.
“With a value of £10.7 trillion the housing market is a huge part of the nation’s wealth,” Zoopla’s Donnell said. The value a homeowner can get for their property “impacts how good a rate they might get when they remortgage,” he added.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.