The FTSE 100 was dragged lower by UK property companies on Friday after the Halifax warned UK housing prices could fall 8% next years.
The Halifax adds to a growing number of property experts and institutions expecting a reset in property prices as the cost of living crisis bites and higher interest rates put off buyers.
“Recent economic announcements and developments are beginning to be reflected in data. We are seeing a slowdown in the market and the number of mortgages approved for house purchase falling as well as a decline in new buyer enquiries,” said Tom Brown, Managing Director of Real Estate at Ingenious.
“There are a number of factors at play here including the escalating cost of living crises, but there will certainly be some very unwelcome additional mortgage costs for owner occupiers and investors throughout 2023 and beyond.”
Persimmon was down 3.3% while Taylor Wimpey gave up 3% and Barratt Developments shed 2.4%. Demonstrating concerns about the wider UK property market, Real Estate Investment Trusts Land Securities and British Land were weaker by 3.7% and 3% respectively.
Consumer headwinds
Halifax’s warning came on a day UK retail sales data also illustrated the pressures on the UK consumer. Data from the ONS showed retail sales declined 0.3% in November compared to 0.3% growth predicted by economists.
“The consumer is facing headwinds from falling real wage growth and inflation which has prompted the cost-of-living crisis by contributing to the squeeze on household budgets,” said Victoria Scholar, Head of Investment, interactive investor.
“Individuals are having to spend a larger proportion of their incomes on essentials like food and gas bills, which means there is less left over to spend on non-essential items with consumers cutting back on clothes and fuel spending.”
The soggy news on UK consumer spending and house prices culminated in a disappointing session for the FTSE 100 which was down 1.5% at the time of writing. Only one stock – Standard Chartered – was in positive territory at the time of writing.
