Nationwide Expects UK House Prices To Log Small Fall Or Stagnate Next Year

(RTTNews) - UK house prices are likely to report another small decrease or remain broadly flat next year amid sluggish economic activity, the mortgage lender Nationwide Building Society said on Friday.

House prices declined 1.8 percent in December from a year ago after falling 2.0 percent in November. Prices were almost 4.5 percent below the all-time high recorded in late summer 2022.

Month-on-month, house prices remained flat following a 0.2 percent rise in the previous month.

Nationwide Chief Economist Robert Gardner observed that housing market activity was weak throughout 2023.

The number of transactions was about 10 percent below pre-pandemic levels over the last six months.

Within total, transactions involving a mortgage decreased by more than 20 percent reflecting the effect of higher interest rates.

Housing affordability remained stretched and deposit requirements were prohibitively high for many prospective buyers.

Gardner said investors expect the Bank of England to cut rates in the years ahead. This shift in view has helped to reduce longer-term interest rates, which underpin fixed mortgage rate pricing.

Nonetheless, a rapid rebound in activity or house prices next year looks unlikely, the economist noted.

"While cost-of-living pressures are easing, with the rate of inflation now running below the rate of average wage growth, consumer confidence remains weak and surveyors continue to report subdued levels of new buyer enquiries," said Gardner.

Moreover, markets are forecasting the BoE to cut rates but there are still upward risks to interest rates. A combination of solid income growth along with moderately lower house prices and mortgage rates will gradually improve affordability over time with housing market activity remaining fairly subdued in the interim, the economist said.

The mortgage lender expects house prices to log another small decline or remain broadly flat over the course of 2024, provided the economy remains sluggish and mortgage rates moderate only gradually.

Early this month, the central bank had maintained its key interest rate at a 15-year high of 5.25 percent for the third straight time.

Markets widely expect the next move to be a rate cut.