"It's going to be a cold January for the housing market"
The cost of the average UK home was £281,272 in December, down by 1.5% on the previous month, according to the latest Halifax House Price Index.
Annual growth also slowed to 2%, from 4.6% in November, but the monthly fall in December was lower than the 2.4% decline recorded in the prior month.
“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,” Kim Kinnaird, director of Halifax Mortgages, said.
“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.”
James Briggs, head of personal finance intermediary sales at specialist lender Together, commented that the drop in house prices recorded in December suggests “it’s going to be a cold January for the housing market.”
“With high mortgage rates and the cost-of-living crisis crunching buyers’ budgets, many buyers are putting property plans on ice for the foreseeable future to prioritise other household expenses,” Briggs added. “Mortgage rates have cooled from their peak last October, but remain higher than a lot of buyers can realistically afford in the tougher economic climate.
“As we face a new winter of discontent, we need specialist lenders now more than ever before. It is only this sector which can offer the flexible criteria individuals need to make their dreams of homeownership a reality and pave the way for a new spring in the housing market.”
Avinav Nigam, co-founder of real estate investment platform IMMO, said that the slight fall in house price growth was expected as momentum has slowed, reflecting economic confidence and rising interest rates from 2022.
“As it becomes harder and more expensive to buy, demand for rental properties continues to grow,” he remarked. “At the same time, rental listings are down significantly as landlords exit the market following an increase in the cost of complying with more regulations.
“The opportunity for professional providers of safe, quality and affordable rental housing for the UK is increasingly clear.”
Nicky Stevenson, managing director at national estate agent group Fine & Country, expects the fall in house prices to continue in the early part of 2023 with more base rate hikes likely coming this year.
“Against this backdrop, mortgage approvals have fallen to their lowest level since June 2020,” she added. “Seasonal factors will have played a part in this, but it is also a sign that some buyers are playing a waiting game for rates to fall.
“It may take some time, but we can expect to see a fresh injection of confidence in the housing market as interest rates begin to stabilise.”
Meanwhile, Halifax also reported that despite a monthly dip in house prices in December, all nations and regions in the UK saw annual house price inflation, although the rate of growth has slowed.
On an annual basis, the North East saw the greatest slowdown in growth, with annual house prices rising by 6.5%, compared to 10.5% the previous month. Average house prices in the region are now £169,980.
Eastern England, West Midlands, and Wales experienced the smallest falls in growth rate, while those buying in the East of England will now pay an average £337,215 with a growth rate 5.5%. In the West Midlands average properties now cost £250,965 with a growth rate 7.3%. The average home in Wales is now £217,547, with annual growth now at 6.1%.
Those buying in Scotland will find an average home now costs £200,166, with the second greatest slowdown in the annual growth in the UK, now at 3.5%. Property prices in Northern Ireland are up 7.1% year-on-year, with average homes now costing £183,825.
The cost of an average home in London in December was £541,239, a growth of 2.9% annually.
When the Halifax House Price Index was established in January 1983 - or 40 years ago - the average UK house price was £26,188. This means that average house prices have grown by nearly 10 times or 974%. The highest recorded average UK house price by Halifax was £293,992 in August 2022.
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