It followed a 1.4% drop in November, and took the value of the average property to £262,068. As a result, the rate of annual growth dropped from 4.4% in November to 2.8% in December.

All regions saw a slowdown in house prices, though this was most pronounced in the South West, according to Nationwide, where annual house price growth dropped from 12.5% in the previous quarter to 4.3%.

By contrast, East Anglia was the region which performed the strongest over the year, registering growth of 6.6%.

Robert Gardner, chief economist at Nationwide, noted that while the conditions in the wider financial markets have settled, following the turmoil of the Liz Truss administration, “mortgage rates are taking longer to normalise”, with activity in the housing market showing “few signs of recovery”.

He added: “It will be hard for the market to regain much momentum in the near term as economic headwinds strengthen, with real earnings set to fall further and the labour market widely projected to weaken as the economy shrinks.”

House prices become ‘more realistic’

A gradual shift to a “more realistic” market is taking place which will continue into 2023, according to Nathan Emerson, chief executive of Propertymark.

He noted the trade body’s own data had shown that competition among buyers had dropped sharply, which had meant significant numbers of sales were being agreed below asking price.

“The sales market is firmly back in the hands of buyers who have been on the back foot for 18 months, so it remains a good time to buy. We would expect to continue to see people keeping a close eye on trends and being more sensible when purchasing compared to what has been previously seen,” he concluded.

Is 2023 the year of the first-time buyer?

Kylie-Ann Gatecliffe, director of KAG Financial, suggested that 2023 is likely to see less of a housing crash and more of a “correction” to the sort of pricing seen before the pandemic.

She added: “As busy as the past two years have been with property sales, it has been tremendously difficult for first-time buyers to get onto the ladder, with many being outbid or simply being priced out of an area. 2023 could be their year.”

Gatecliffe also pointed to lenders reducing mortgage rates as a further boon to the property market in the months ahead.