Analysts say job losses and pay cuts could mean more homes being put on the market
Analysts say job losses and pay cuts could mean more homes being put on the market © AFP via Getty Images

UK house prices last month fell for the first time in eight years, a key building society survey said, damping hopes of a sustained recovery as the market reopens following lockdown.

Nationwide’s house price index showed prices in June were down 0.1 per cent year on year, having increased 1.8 per cent the previous month, marking the first decline since December 2012.

Prices for homes in the UK fell 1.4 per cent month on month, taking into account seasonal changes, after a fall of 1.7 per cent the previous month. House prices in June were 3.2 per cent lower than in April.

A surge in pent-up demand had hinted at a recovery for the market after the freeze on transactions and viewings imposed during lockdown was lifted and sales of homes rebounded to above pre-coronavirus levels.

But Nationwide’s chief economist, Robert Gardner, said stalling house price growth was “unsurprising” given the unprecedented economic hit dealt by lockdown.

“While latest data from HMRC showed a slight pick-up in residential property transactions from April’s low, in May they were still 50 per cent lower than the same month in 2019,” Mr Gardner added.

Owners and buyers are now looking with caution toward what will be an uncertain year, and economists forecast a fall in prices in the medium term.

Howard Archer, chief economist at EY Item Club, the economic forecasting group, said he expected house prices to fall back about 5 per cent over the next few months.

The economic impact of coronavirus on already impaired consumer confidence would mean the “upside to activity may be limited” for some time to come.

“Consumer confidence is currently very low compared to long-term norms and many people are likely to remain cautious for some time to come,” added Mr Archer.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that job losses and pay cuts could mean more homes being put on the market even if demand remained depressed.

“We worry that forced home sales will increase in the winter, as unemployment rises and lender forbearance ends,” he said, adding that one in six borrowers had at present been granted a mortgage payment holiday lasting up to six months.

Nationwide’s figures showed a further slowdown in mortgage activity, with only 9,300 approvals for purchasing homes in May, 86 per cent down from the same month last year. February recorded 73,700 mortgage approvals.

“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,” Mr Gardner said. “Much will depend on the performance of the wider economy, which will in turn be determined by how the pandemic and restrictions on activity evolve.”

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