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UK house prices registered the first annual fall since June 2020, which was also the worst decline in a decade, as the squeeze on household income from higher interest rates and inflation damped demand in the property market, data from Nationwide Building Society showed Wednesday.
House prices declined 1.1 percent on a yearly basis in February, offsetting the 1.1 percent increase in January. Economists had forecast a 0.9 percent fall.
This was the first annual decline since June 2020 and also the biggest fall since November 2012.
Month-on-month, house prices dropped 0.5 percent, following a 0.6 percent fall in January. Prices were forecast to ease 0.4 percent in February.
“The recent run of weak house price data began with the financial market turbulence in response to the mini-Budget at the end of September last year,” Robert Gardner, Nationwide’s chief economist, said.
“While financial market conditions normalized some time ago, housing market activity has remained subdued,” Gardner added.
The economist noted that weak consumer confidence and the cumulative impact of the financial pressures weighed on households’ decision on house purchases.
“It will be hard for the market to regain much momentum in the near term since economic headwinds look set to remain relatively strong, with the labor market widely expected to weaken as the economy shrinks in the quarters ahead, while mortgage rates remain well above the lows prevailing in 2021,” Gardner said.
Nationwide expects housing market conditions to gradually improve if inflation moderates in coming months, easing pressure on household budgets.
The Bank of England has raised its benchmark interest rate by 390 basis points since the current tightening cycle began in December 2021.
Although inflation eased in January, the rate remained at a double-digit 10.1 percent.
The BoE forecast inflation to reach around 4 percent towards the end of this year and to hit the 2 percent target sustainably in the medium term.
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