The Facts
Last month saw the biggest decline in UK house prices in more than a decade — falling 1.1% in February against the same month last year — according to an announcement from mortgage provider Nationwide on Wednesday.
It was the largest year-on-year drop since November 2012 and came as distinct data from the Bank of England (BoE) revealed British lenders had approved the smallest number of mortgages in January this year since 2009 — excluding a period at the start of the COVID lockdown.
The Spin
Narrative A
While house prices are currently seeing historic dips as the waves of the catastrophic mini-budget under Liz Truss continue to dissipate, markets should not catastrophize over this data. Some economists have pointed out that the UK is on track to see inflation recede in the second half of 2023 — something that will see momentum and stability return to the economy.
Narrative B
The only question about the short to medium future of the housing market that needs answering is whether this is the beginning of a gradual deflation or whether the whole system — on which the UK economy is largely based — is about to burst. Even with a decline of just 12% the stability of this sector of the market could be compromised. Economists should not be feeling optimistic about these developments.
