Predicting where house prices go next is more difficult, expert says
The average UK house price in March was £287,880, increasing by 0.8% from £285,660 recorded in the previous month, data from mortgage lender Halifax showed.
While house prices increased in each of the first three months this year, the latest figure is still around 2% below the peak reached last August, when the average house price was £293,992.
On an annual basis, house prices were 1.6% higher than a year ago, slowing from the 2.1% annual price growth in February. Halifax noted that this is the weakest rate of annual growth in nearly three and a half years, having fallen significantly since June 2022’s peak of a 12.5% price rise.
Despite this relatively small increase in house prices, Kim Kinnaird, director at Halifax Mortgages, said these latest Halifax House Price Index figures continue to suggest relative stability in the housing market at the start of 2023 and align with many other recent industry surveys and data.
“The UK housing market continues to show resilience following the sharp downturn at the end of 2022, with average property prices rising again in March,” Kinnaird commented. “This has been characterised by a partial recovery in activity and transactions, especially when compared to the significant drops seen at the end of last year, with latest Bank of England data showing mortgage approvals rising for the first time in six months.
“The principal factor behind this improved picture has been an easing of mortgage rates. The sudden spike in borrowing costs that we saw in November and December has now been largely reversed, and while rates remain much higher than the average of the last decade, across the industry a typical five-year fixed rate deal at 75% LTV is down by more than 100 basis points over the last few months.”
Kinnaird, however, admitted that predicting exactly where house prices go next is more difficult.
“While the increased cost-of-living continues to put significant pressure on personal finances, the likely drop in energy prices – and inflation more generally – in the coming months should offer a little more headroom in household budgets,” she said.
“While the path for interest rates is uncertain, mortgage costs are unlikely to get significantly cheaper in the short-term and the performance of the housing market will continue to reflect these new norms of higher borrowing costs and lower demand. Therefore, we still expect to see a continued slowdown through this year.”
Adam Smith, director at Northampton-based mortgage broker Alfa Mortgages, said the outlook for house prices in 2023 will be heavily influenced by consumer confidence, which in turn will be shaped by a complex interplay of factors, including inflation and uncertainty surrounding interest rates.
“A decline in consumer confidence could lead to a sharper decrease in the value of UK bricks and mortar, but the extent of this remains uncertain and is the million-dollar question on everyone’s mind,” Smith added. “There are so many variables at play it’s hard to know where the UK property market is going next.”
James Briggs, head of personal finance intermediary sales at Together, believes that with consumer confidence remaining weak and high inflation continuing to weigh heavily on people’s ability to buy or save enough for adequate deposits, there may be a few months yet until any real momentum can be seen.
“However, that is not to say all activity has ground to a halt,” Briggs said. “Opportunities for first-time buyers are still there, particularly through schemes such as shared ownership, or even parental support through family mortgages which are growing in popularity. In these cases, family members can assist with the deposit through their own savings or property.
“It is worth exploring options through specialist brokers and lenders, who can often be more flexible in helping borrowers to secure the finance needed to meet their ambitions.”
House prices rose in all UK nations and regions
Halifax also reported that the average house price increased in all the UK nations and regions during March.
Northern Ireland continues to report the strongest annual growth in house prices at 4.9% with an average house price of £186,459, followed by the West Midlands at 3.8% and an average property price of £248,308.
With the exception of Greater London and the North East, all areas of the country experienced a slowdown in the rate of annual house price inflation.
In Wales the rate of annual property price inflation has slowed to 1% with an average house price of £213,959. In Scotland, the annual rate of growth fell to 2.3% with an average property price of £199,853. Average house prices in London are up slightly by 0.1% with the typical property now costing £537,250.
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