House prices declined for the fifth consecutive month in November 2023 and at their fastest rate since 2011, the latest Office for National Statistics data shows.
High mortgage rates and the cost of living crisis weighed on buyer budgets and hit the housing market for much of last year.
The latest ONS house price index shows average prices fell 2.1% annually in November 2023 to £284,950- £6,00 lower than a year ago.
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It follows a 1.3% annual drop in October, which was revised from 1.2% previously.
Average prices were down 0.8% on a monthly basis in November.
The ONS index has a time lag compared with other house price reports as it is based on both mortgaged and cash transactions recorded at the Land Registry, which can take two months or more.
More recent figures from Nationwide suggest average prices fell 1.8% overall in 2023, while Halifax claims the market was actually up 1.7% in the 12 months to December.
The Nationwide and Halifax data is based on their own mortgage lending activity, while the Land Registry may be seen as more reliable as it involves all transactions, including those made in cash.
“House price falls accelerated in November, as they endured the steepest drop in 13 years,” says Sarah Coles, head of personal finance at Hargreaves Lansdown.
“It reflects just how dire things were at the tail end of the summer, when so many of these sales were agreed. While mortgage rates have fallen in the months since, we’re not out of the woods yet. The market still faces some serious challenges, which could pull prices even lower.”
Coles says mortgage rates reached a peak in August, and many buyers struggled to be able to borrow as much as they needed.
“Over this period, sales ground to a halt, so an awful lot of sellers were forced to cut their prices in order to shift their home,” she adds.
“Even as prices fell, buyers sat on their hands, and the RICS survey showed that buyers were still thin on the ground in November.”
Where are house prices falling the most?
No-one really lives in the average property and there are regional differences.
The largest price drop in the 12 months to November 2023 was in London, where typical prices fell 6% annually.
It remains the most expensive part of the country for property though, with average prices at £505,283.
The North East registered the smallest drop, down just 0.4%, while prices were actually up 2.1% and 2.2% in Northern Ireland and Scotland respectively.
On a monthly basis, the West Midlands saw the steepest fall, with average prices down 3.1%, followed by a 2.7% drop in the South West of England.
All property types fell in price, with terraces down 3.8% and flats down 1.8%.
Meanwhile, average prices for detached and semi-detached homes fell 0.7% and 1.7% respectively.
Simon Gerrard, managing director of London-based estate agent Martyn Gerrard, suggests the market has turned a corner more recently.
“We’ve seen a 20% increase in people registering to buy a home compared to this time last year,” he says.
“This is unsurprising given the growing competition between lenders.
“This will intensify when the Bank of England starts dropping the interest rate, which is expected soon. Once this takes place, I expect that we will see a lot of pent-up demand unleashed.
“I have always maintained the fall in house prices would be muted and temporary.”
Will house prices fall in 2024?
The time lag on the ONS data can make it hard to make a judgement on the health of the housing market and whether house prices will rise or fall.
There have been plenty of changes since November, with interest rates held for a third successive Bank of England meeting, while mortgage pricing has begun falling below 4% for best buy deals and inflation has dropped from double digits.
There are signs that this is making sellers more confident but Coles warns against getting too excited, especially after today’s shock rise in inflation.
“When you consider the risks facing the world economy, and the fact the UK economy is teetering on the brink of recession, there’s every chance that the property market has some seriously tricky months on the way, and this may not be the last of the price falls we see in 2024,” she says.
It comes as the latest Rightmove asking price data shows average listings prices rose 1.3% between January and December – the highest rate for the month since 2020.
Rightmove has predicted that asking prices will drop by an average 1% this year, while Zoopla has forecast a 2% drop based on sales prices.
Some commentators have begun changing their outlook though as mortgage rates drop and analysts expect interest rate cuts earlier this year.
Property and estate agency brand Knight Frank issued new forecasts this week, suggesting prices may actually rise by 3%.
“UK house price declines are bottoming out as mortgage rates fall, which should feed through into the official data in coming months,” says Tom Bill, head of UK residential research at Knight Frank.
“Financial markets now expect five interest rate cuts of 0.25% this year as inflation comes under control more quickly than expected, which has improved the outlook markedly for buyers and sellers.”
Bill says political instability has become the biggest risk facing the market.
