UK house prices suffered the largest monthly decline in more than a decade in May, as social distancing measures and the withdrawal of some mortgage products slowed activity.
Sale prices fell 1.7 per cent last month, according to the Nationwide House Price Index, the first indication of how the market has performed since government guidance was introduced allowing in-person viewings and home moves in mid-May. The fall in prices was the highest drop since February 2009 when mortgage lending was held back in the aftermath of the 2008 financial crisis.
Annual house price growth slowed to 1.8 per cent, compared with 3.7 per cent in April. During the first two months of the year, transaction levels and prices had started to edge up thanks to greater political certainty following the election of a Conservative majority and record levels of employment.
However, the implementation of ‘stay at home’ guidance at the end of March meant around 450,000 property transactions were put on hold, according to government estimates.
While the building society’s ability to generate the house price index has not been impacted to date, as sample sizes have remained sufficiently large and representative to generate robust enough results, that could change, cautioned Nationwide's chief economist Robert Gardner.
“Low transaction levels may still make gauging price trends difficult in the coming months – especially for regional indices, which by their nature have lower sample sizes,” he said.
The consensus within the property industry is that UK house prices will fall this year, but forecasts vary significantly over how large that decline will be. At the more pessimistic end, the Centre for Economic and Business research forecasts a 13 per cent correction, while Knight Frank puts the average price reduction at just 3 per cent.
The number of UK mortgage approvals fell 80 per cent in April, hitting a record low and 40 per cent below the post-financial crisis trough in November 2008, according to Bank of England data.
Yet there are signs mortgage availability has improved. On 1 June, the number of available products in the market had risen month-on-month across all loan-to-value ratios, except those at 95 per cent, according to Moneyfacts. That followed a sharp contraction in products since the end of March when some lenders, including Halifax and Nationwide, withdrew those with an LTV of more than 75 per cent. Both lenders have since relaunched deals offering 85 per cent LTVs.
