The average UK house price fell 0.4% between November and December 2022, according to the latest data from HM Land Registry, providing further evidence the housing market is heading for stormy waters.
Following this decline, the average UK property now costs £294,329 according to Land Registry data.
Overall, UK house prices were 9.8% higher year-on-year in December.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Other house price indexes report a similar picture.
Last week, the Royal Institute for Chartered Surveyors showed buyer demand was at its lowest since 2009.
Similarly, Halifax’s latest index reported UK house prices stalled in January following four months of consecutive falls, while Nationwide has recorded five consecutive months of slowing growth.
“A further drop in house prices comes as little surprise, though it is likely some would have expected a larger fall by this stage,” says Charlotte Nixon, mortgage expert at Quilter.
“The ongoing cost-of-living crisis continues to put a real strain on millions, and increased energy bills – which have not been helped by the cold snaps seen in recent weeks – will likely worsen as the winter draws on.”
“This pressure on our everyday finances could put a temporary halt to people’s plans to move, particularly given the added expense that comes with it.”
How did house prices change per region?
HM Land Registry said house price annual growth was strongest in the East Midlands, where prices increased by 12.3% over the 12 months to December 2022.
The lowest annual growth was in Scotland, with prices increasing by 5.7% for the same period.
London recorded the lowest annual growth, with prices increasing by 6.7% in the 12 months to December 2022.
Where will house prices go next?
“It seems ridiculous, but it has taken until now for us to see early signs of the impact of September’s mini-budget in the official figures,” says Sarah Coles, head of personal finance at Hargreaves Lansdown.
“However, even at this stage it won’t have captured the full impact of mortgage rate hikes, because an awful lot of people making buying decisions at this point had already agreed a mortgage at a much lower rate,” adds Coles. “Instead, we’re seeing the impact on their confidence that they could continue to pay the mortgage in future.”
In December the Bank of England (BoE) reported mortgage borrowing fell by £1bn as buyers retreated from the market. As the central bank has hiked interest rates, mortgage rates have remained high, and there could be further rate hikes to come.
Indeed, the BoE is widely expected to raise rates again when it next meets in March. But its latest interest hike to 4% “has done little to mortgage rates”, says Nixon.
“Some fixed rates are even beginning to come in under the base rate as lenders compete for new business and to retain their existing clients.”
“While the lowest level fixed rates are only available to those with sizeable deposits or high levels of equity, as we move further into 2023, declining mortgage rates and lower house prices could well start to entice people who previously put their plans on hold to reconsider their options,” says Nixon. “If this is the case, house prices may not fall as much as originally feared.”
Affordability will remain stretched, particularly for first-time buyers who might be struggling to save for a deposit due to rising rents.
Rent prices jumped 4.4% in the 12 months to January, the largest annual percentage change since records began back in 2015.
“Fast rising rent is a growing blocker for many would-be homeowners, curtailing deposit-building efforts,” says Myron Jobson, senior personal finance analyst at interactive investor.
-
8 of the best lakeside properties for saleThe best lakeside properties – from a house on the southeastern shore of Loch Lomond, to a 15th-century hall overlooking a lake in King’s Lynn, Norfolk
-
Gold’s allure and why you should never 'pay a premium for graded coins'It is easy to become distracted by the beauty of gold, but remember why you buy it, says Dominic Frisby
-
Halifax: House price slump continues as prices slide for the sixth consecutive monthUK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investmentsInvestors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodationStudent accommodation can be a lucrative investment if you know where to look.
-
The world’s best bargain stocksSearching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in BritainNew research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
-
UK recession: How to protect your portfolioAs the UK recession is confirmed, we look at ways to protect your wealth.
-
Buy-to-let returns fall 59% amid higher mortgage ratesBuy-to-let returns are slumping as the cost of borrowing spirals.
