UK housing market sees first annual price drop in over a decade

After many years this could be the moment for re-visiting investment ideas in the real estate sector as house prices in the United Kingdom have experienced their first annual decline for over a decade, according to UK real estate company Zoopla.

This drop in prices is just one facet of a complex housing landscape, influenced by various economic factors and consumer sentiment.

One significant factor enticing buyers is the highest level of discounts on house prices seen in four years. Homes are being sold at an average discount of 4.2%, equivalent to £12,125 (€14,020) below the asking price. This discount phenomenon has been further intensified by recent increases in mortgage rates, which have pushed potential buyers to seek favourable deals.

Amidst this environment, there has been a notable surge in net borrowing of mortgage debt by UK residents, reaching £1.2 billion (€1.38 billion) in August. This surge represents the fourth consecutive monthly increase and the highest level since January 2023. Despite the challenges, buyers are still entering the market.

Net approvals for house purchases in the UK, often seen as a predictor of future borrowing trends, fell to 45.4 thousand in August 2023, marking the lowest level since February. This decline can be attributed to the Bank of England's aggressive tightening of monetary policy, which has impacted housing activity.

Approvals for remortgaging, including only those with different lenders, also plummeted to £25,000 (€28,800), reaching their lowest point since July 2012. These trends signal a cautious approach among both buyers and homeowners in the face of rising interest rates.

The Institute for Fiscal Studies (IFS) has forecasted a significant tax rise equivalent to approximately