20th Feb 2023 12:19
(Alliance News) - A downward trend in UK house prices eased this month, figures from Rightmove showed Monday, though it could only prove a temporary respite for the sector.
Shares in housebuilders were largely higher around Monday afternoon in London. Taylor Wimpey PLC rose 0.9%, Persimmon PLC climbed 0.8% and Barratt Developments PLC was up 0.3%.
Property portal operator Rightmove said the average price of properties coming on the market was GBP362,452 in February, up ever-so-slightly from GBP362,438 in January.
It was, however, the smallest February increase on record. The housing sector typically shows signs of strength in the early parts of the year.
Despite house price growth being the weakest since the Rightmove series began, analysts at the property portal said the reading "could be seen as a positive indicator for the year ahead".
There were worries that house prices would tumble in the face of interest rate hikes. Rightmove's numbers suggest that may not be the case.
"In addition to market conditions demanding greater realism on price, we are transitioning into a slower paced market, where buyers will take longer to find the right property at the right price due to the higher cost of servicing a mortgage," Rightmove analyst Tim Bannister said.
"There are other indicators that this will be a softer rather than a hard transition, despite the turbulence at the end of 2022."
Analysts at Davy, however, said the future of UK interest rates are key to whether or not the sector enjoys a "soft" landing.
"The key question for the UK housing market is whether the Bank of England will follow through with further rate hikes. The Overnight Index Swap curve currently peaks at 4.44% in August 2023, so only one more 25 basis point rate hike is fully priced in," Davy analysts said.
Rightmove said the rapid mortgage rate increase that also came in the wake of the mini-budget has ticked downwards in recent months, with data indicating that a five-year fixed mortgage with a 15% deposit would now have an average rate of 4.82%, down from 5.9% in October 2022.
The mini-budget announcement in September had sent mortgage rates skyrocketing amid financial market turmoil.
Davy analysts added: "Last week's Moneyfacts data showed the average two-year fixed mortgage rate fell by just 3bps to 5.33% and the three-year fixes to 1bp to 5.22%. This shows that the Bank of England's February 2 decision to raise official rates to 4% was already priced in, but the pace of decline in mortgage rates has slowed."
All-in-all, Davy predicts a tough outlook for the UK property sector.
"The Halifax and Nationwide indices already indicate that UK house prices have fallen by 4.2% and 3.2% respectively in January. Further price falls are likely. The Royal Institution of Chartered Surveys survey showed that a strong net balance on estate agents' three-month (66%) and 12-month (40%) price expectations were sharply negative in January – the weakest readings since the global financial crisis in 2008/09," Davy added.
"The UK Treasury's survey of external forecasts shows that on average house prices are expected to fall by 6% through 2023."
By Eric Cunha, Alliance News news editor
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Related Shares:
Barratt DevelopmentsTaylor WimpeyPersimmon