UK House Prices Plummet at Fastest Rate Since Financial Crisis

Average house prices in the UK fell at the steepest rate since February 2009 last month, according to Nationwide.

The latest data revealed that the average price of a house fell to £218,902 in May - a drop of 1.7% from the previous month. This is the biggest fall since the financial crisis, when the average cost of a home fell as low as £147,746.

Despite the annual growth rate being 3.7% in April, it has now slowed to 1.8% - the slowest since December. Prospective buyers say they will return to the housing market after waiting for at least six months.

The housing market had been gathering momentum early on in the year, as confidence grew after the general election. However, the lockdown imposed on 23 March by the government in order to battle the coronavirus pandemic brought the housing market to a halt.

Other than those deemed ‘reasonably necessary’, house moves were banned across the country. New properties were banned from being listed by estate agents, and existing listings could only be viewed by househunters virtually. The housing market reopened in mid-May after seven weeks of lockdown.

A 5% fall in house prices over the next five months is being predicted by the economic forecasting group EY Item Club. Howard Archer, its chief economic adviser, said: “Housing market activity is likely to be limited in the near term… Many people have already lost their jobs, despite the supportive government measures, while others will be worried that they may still end up losing theirs once the furlough scheme ends.

“Additionally, many incomes have been affected. Consumer confidence is currently at or near record low levels and many people are likely to remain cautious for some time to come when making major spending decisions such as buying or moving house.”

Prior to the coronavirus pandemic striking, Nationwide’s chief economist, Robert Gardner, had already forecasted that there would be no growth in house prices in 2020.

“It is too early to forecast what the long-term effects of the outbreak on the economy and house prices will be,” Gardner said.

“However, the raft of policies adopted to support the economy should help ensure the impact on the housing market will ultimately be less than would normally be associated with an economic shock of this magnitude.”

Insufficient data has caused the Office for National Statistics to suspend its official house price index.