What is happening to house prices?

House prices may have been slowing down, but asking prices are on the rise. We look at the latest on what is happening to house prices as ONS releases its latest annual data

Set of keys and a model house on a table
(Image credit: © Getty images)

If you've been keeping a keen eye on house prices lately like we have been on MoneyWeek, you may have been left wondering what is actually happening with house prices in the UK or indeed if it is a good time to buy a house?

While one index reports a slowdown in house prices, another may suggest a rise - and if you’re reading into what asking prices are, then you will have seen Rightmove saying asking prices went up last month by £3,000 and recent HMRC data shows property transactions were down.

We look at what the latest is with UK house prices as the Office for National Statistics (ONS) today releases its latest data on where house prices are heading.

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ONS: house prices increase 6.3% over 12 months

According to today’s ONS data, the average UK house prices increased by 6.3% in the 12 months to January 2023, down from 9.3% in December 2022.

So, while we are seeing a slowdown, prices have increased in a 12 month period.

The average UK house price was £290,000 in January 2023 - £17,000 higher than 12 months ago.

Average house prices increased over the 12 months to £310,000 (6.9%) in England, £217,000 in Wales (5.8%), £185,000 in Scotland (1.0%) and £175,000 in Northern Ireland (10.2%).

And if you’re looking to buy a house in London, you may find the average price tag at around £534,000, though ONS data shows that the rise was up just 3.2% in a year in the capital.

Here's How house prices have been moving since 2006.

Average UK house price in 2022

Source: ONS

What will happen to house prices in 2023?

The ONS data does not paint a clear picture of what will happen to house prices in 2023. The last 12 months saw extreme turbulence, such as the disastrous mini-Budget headed by then chancellor Kwasi Kwarteng which saw a spike in borrowing costs. Both buyer and seller confidence has been dented, especially as borrowing rates remain high compared to 12 months ago.

According to Tom Bill, head of UK residential research at Knight Frank: “Annual price falls are almost inevitable in the coming months but demand and supply have recovered strongly since Christmas, which means a double-digit price crash this year feels unlikely.”

Sarah Coles, head of personal finance, Hargreaves Lansdown, adds: “Affordability calculations reveal just why rising rates have taken such a toll on buyer confidence. With the average full-time employee in England spending 8.3 times their annual income in order to buy a typical home, we’re being forced to take on ever-larger mortgages. It means a small change in mortgage rates has a far larger impact on our monthly payments.

“On the positive side, from October onwards, mortgage rates started to drop back, and while there were no sudden movements, there’s the hope that as they kept falling, confidence will have started to rebuild a little. We’ve seen a bit more volatility recently, but rates are still expected to trend downwards through the rest of the year as inflation eventually drops back.”

However, it doesn’t alter overall predictions that annual house price inflation will turn negative; the Office for Budget Responsibility expects them to drop 10% from the peak.

Kalpana Fitzpatrick

Kalpana is an award-winning journalist with extensive experience in financial journalism. She is also the author of Invest Now: The Simple Guide to Boosting Your Finances (Heligo) and children's money book Get to Know Money (DK Books). 

Her work includes writing for a number of media outlets, from national papers, magazines to books.

She has written for national papers and well-known women’s lifestyle and luxury titles. She was finance editor for Cosmopolitan, Good Housekeeping, Red and Prima.

She started her career at the Financial Times group, covering pensions and investments.

As a money expert, Kalpana is a regular guest on TV and radio – appearances include BBC One’s Morning Live, ITV’s Eat Well, Save Well, Sky News and more. She was also the resident money expert for the BBC Money 101 podcast .

Kalpana writes a monthly money column for Ideal Home and a weekly one for Woman magazine, alongside a monthly 'Ask Kalpana' column for Woman magazine.

Kalpana also often speaks at events. She is passionate about helping people be better with their money; her particular passion is to educate more people about getting started with investing the right way and promoting financial education.