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UK house prices to reset to 2021 values

Nick Cheek
Written By:
Nick Cheek

UK house prices will see a correction which will bring values back to the level they were in April last year, according to Halifax.

In Halifax’s housing market review and outlook for 2023, it predicted that house prices would decline by 8% annually next year and reverse some of the gains made during the pandemic.

According to the bank’s house price index, this would put the typical house price at £258,204.

Andrew Assam, homes director at Halifax, said: “It’s important to remember we saw some of the biggest house price increases the market has ever seen over the last few years.

“Between March 2020 and August 2022, the average house price increased by nearly £55,000 23% to £293,992, a new record high.”

The bank said the base rate was still expected to peak at 4% in 2023, while rising mortgage rates and the cost of living would put pressure on household finances which would affect demand.

A review of the year

Halifax described 2022 as a “tale of two halves” for the UK housing market as the first half saw average house prices rise at pace, adding £17,500 to values by June.

By August, property prices reached a record high of £293,992.

As of November, Halifax put the average house price at £285,579 compared to £272,778 a year ago, representing a rise of £12,801. Since November 2012, house prices have risen by 71%, adding £166,627 in value.

Economic uncertainty during the second half of the year suppressed purchase activity and resulted in a 2.3% decline in house prices by November.

Annual house price growth was pegged at 4.7% during the month, having peaked at 12.5% in June.

Assam said: “Looking ahead to next year, it will clearly be a more challenging economic environment and the housing market will continue to re-balance to reflect these new norms. Though the limited supply of properties for sale will continue to support prices, the pandemic-driven surge in demand has receded, and we’re emerging out of more than a decade of record low interest rates.

Unemployment is expected to rise and reach around 5.5%. This is relatively low by historical standards, but will be challenging for many people. While inflation as a whole may be close to or at its peak, household energy bills are likely to rise again, putting more pressure on household budgets.”