"Housing affordability for potential buyers and home movers has become much more stretched at a time when household finances are already under pressure from high inflation."
Annual UK house price growth slowed to 4.4% in November, from 7.2% in October, according to the latest Nationwide house price index.
Prices fell by 1.4% month-on-month, the largest fall since June 2020, following 0.9% drop in October.
Robert Gardner, Nationwide's chief economist, said: “The fallout from the mini-Budget continued to impact the market, with November seeing a sharp slowdown in annual house price growth to 4.4%, from 7.2% in October.
“While financial market conditions have stabilised, interest rates for new mortgages remain elevated and the market has lost a significant degree of momentum. Housing affordability for potential buyers and home movers has become much more stretched at a time when household finances are already under pressure from high inflation.
“The market looks set to remain subdued in the coming quarters. Inflation is set to remain high for some time and Bank Rate is likely to rise further as the Bank of England seeks to ensure demand in the economy slows to relieve domestic price pressures.
“The outlook is uncertain, and much will depend on how the broader economy performs, but a relatively soft landing is still possible.
“Longer term borrowing costs have fallen back in recent weeks and may moderate further, especially if investors continue to revise down their expectations for the future path of Bank Rate. Given the weak growth outlook, labour market conditions are likely to soften, but they are starting from a robust position with unemployment still near 50-year lows.
“Moreover, household balance sheets remain in good shape with significant protection from higher borrowing costs, at least for a period, with around 85% of mortgage balances on fixed interest rates. Stretched housing affordability is also a reflection of underlying supply constraints, which should provide some support for prices."
Jonathan Hopper, CEO of Garrington Property Finders, commented: “Two months on from the chaotic aftermath of the mini-Budget, buyers and sellers are still locked in a standoff over what constitutes fair value.
“So far, all the signs are that sellers are flinching first. Buyers, sensing that the balance of power is tilting ever further in their favour, are frequently asking for – and getting – significant price reductions.
“Asking prices are starting to come down too, as sellers compete for the attention of an increasingly rare and powerful group - proceedable buyers.
“In some areas, sellers’ fears of falling prices have unleashed a surge in supply, as those with a home to sell rush to get it on the market before prices soften further.
“For all the speed of the price correction, this isn’t yet a recessionary market; and there is still activity on the front-line as committed and strategic buyers sense a moment of opportunity.
“But while mortgage rates have come down off October’s highs, the coming months will see many would-be buyers have to rethink what they can safely afford.
“If this translates into further downward pressure on prices, the winter will be long and hard for sellers.”
Zaid Patel, director at London-based estate agents, Highcastle Estates, added: “We are now in a market where buyers are trying their luck by offering 10%-15% lower than asking price to see which seller will panic sell. Not only are property investors lowballing, but so are first-time buyers, as they factor in their additional mortgage costs. As we approach the end of the year when the property market falls into a lull, there are a few sellers who are ready to take their 'loss' and move on with their life for a fresh start in 2023. Equally, there are plenty of cash buyers, who have liquidated some of their assets, on the look out for deals. They will now be integral to manage this housing market more than ever. Once prices drop 10%-15%, which they likely will, expect an influx of cash buyers, stabilising and settling the market.”
