According to data from Nationwide, UK house prices are finally falling slightly. They fell 0.9% in October 2022 and a further 1.4% in November, although the average UK home is still over 4% more valuable than it was this time last year. Many are predicting further falls to come, but what might this mean for you?
How house prices falling will affect first-time buyers:
Any reduction in house prices is good news for those thinking of getting on the housing ladder for the first time. If house prices fall you will need a smaller deposit, will potentially pay less stamp duty and can apply for a smaller mortgage, meaning cheaper monthly payments.
Or you can use your extra purchasing power to upgrade your choice of new home – particularly as the latest fall in house prices has come at the same time as more reductions in mortgage rates.
How house prices falling will affect existing homeowners:
On the face of it, falling house prices seem like a bad thing if you already own your own home, as the value of your investment is being reduced.
However, falling house prices only actually impact you if you sell whilst they are low. House prices have always fluctuated, so over time they will go back up again. If you can wait to sell, you almost certainly won’t lose out.
If waiting isn’t an option, it’s not necessarily bad news! If you’re selling your home whilst property prices have taken a knock, the new home you’re looking to buy has almost certainly fallen in price too. This means your real-world buying power is effectively somewhere near the same.
How long will house prices keep falling?
This is really difficult to predict. Some people believe that this fall is just a natural ‘correction’ – meaning that house prices were too high and needed to come back down. Others point to the government’s recent ‘mini-budget’ spooking the money markets and causing them to lose pace. The reality is that it’s likely to be a bit of both, making it harder to determine how far and how fast any further falls will come.
The most important thing to remember for home-owners and first-time buyers alike is not to panic. These types of movements in property prices are baked-in to the property market. Over the lifetime of owning your own home, property prices are guaranteed to rise and fall (along with interest rates) so you should think of it as inevitable.
If you’re thinking about buying your first home or have questions about the impact of changing house prices, get in contact – we’re happy to help.
