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Average UK house price falls to £281k as Halifax forecasts 8% drop

Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
Updated:
06/01/2023

Average UK house prices fell 1.5% to £281,272 in December, with Halifax forecasting they’re set to fall 8% in 2023, taking them back to April 2021 levels.

This figure is down from the average price of £285,425 recorded in November, according to the Halifax house price index.

The decline in prices was softer than the 2.4% contraction noted in November, while the annual change was smaller than the 4.6% uptick seen in the previous month. 

Halifax said house prices rose annually in all regions, but there was a slowdown in the rate of growth.

The North East saw the largest slowdown in annual growth, as house prices rose by 6.5% to £169,980 compared to a growth of 10.5% seen in November. 

The smallest declines in growth rates were seen in Eastern England, West Midlands and Wales with annual changes of 5.5%, 7.3% and 6.1% respectively. 

Kim Kinnaird, director of Halifax Mortgages, said: “As we’ve seen over the past few months, uncertainties about the extent to which cost of living increases will impact household bills, alongside rising interest rates, is leading to an overall slowing of the market.  

“The housing market was a mixed picture in 2022. We saw rapid house price growth during the first six months, followed by a plateau in the summer before prices began to fall from September, as the impact of cost of living pressures, coupled with a rising rates environment, began to take effect on household finances and demand.”

She added: “As we enter 2023, the housing market will continue to be impacted by the wider economic environment and, as buyers and sellers remain cautious, we expect there will be a reduction in both supply and demand overall, with house prices forecast to fall around 8% over the course of the year.  

“It’s important to recognise that a drop of 8% would mean the cost of the average property returning to April 2021 prices, which still remains significantly above pre-pandemic levels.” 

A correction, not a crash 

Industry figures suggested the drop in average house prices was not a cause for concern, as it was just a correction of record rises seen since the start of the pandemic. 

Jonathan Hopper, CEO of Garrington Property Finders, said: “With the paralysis of October and November past, the market slipped deeper into correction territory as the year ended. 

“But this remains a correction rather than a crash, for the simple reason that supply and demand are both waning together.” 

He added: “While the market still faces headwinds and fragile levels of confidence, there are some early New Year signs of cautious optimism – and we may yet see a Spring thaw, if not a bounce.” 

Jonathan Burridge, founding adviser at We Are Money, said there was a “tremendous pressure” on house prices and some regions would see bigger drops than others. 

He said: “There remains huge demand though for first-time buyer and second-home properties, so they are less likely to be impacted in the short-term. Rates are probably close to where they will remain for a while, so, we will see prices cool until incomes or consumer expectation changes.  

“I don’t believe a crash is coming; more likely we will see simple stagnation which is long overdue as the low cost of borrowing has fueled the market.” 

Bag a bargain this Spring 

Others indicated that potential buyers were still waiting to see what would happen in the market with the situation likely to be clearer in Spring. 

Samuel Mather-Holgate, managing director of Mather and Murray Financial, said: “There is plenty of room for prices to fall and I expect little activity in the market until we know where prices decide to settle and that won’t be until late Spring. For buyers who are willing to wait until then, this will be the time to bag a bargain.  

“There will be a lot of distressed sellers needing to offload their properties as they cannot cope with the cost of living. I expect interest rates may have peaked by then.” 

Emma Cox, managing director at Shawbrook, hinted that people would wait until the Spring Budget to make their decisions. 

She added: “The reduction in transaction numbers, largely driven by higher mortgage rates and soaring inflation, looks set to stay through 2023 as the housing market experiences a price correction from the unprecedented highs experienced in the past two years.  

“As a result, prospective buyers will look for government support in the Spring Budget in March for confidence before making any large purchasing decisions.”