The January Halifax House Price Index showed that house prices began to stabilise in January, as cost of living and higher interest rates leads to a slower housing market
The slowdown in annual house price inflation is reflected in most nations and regions across the UK.
UK house prices have shown signs of stabilisation across all areas. Wales, which recorded some of the strongest annual house price inflation over the last few years, saw its rate of growth fall to +2.0% with an average house price of £210,275.
The South West of England has also seen annual house price growth slow considerably, now at +2.7% with an average house price of £298,853.
Growth eased slowly in Northern Ireland and Scotland
In Northern Ireland and Scotland, the pace of annual growth eased more slowly. Those buying a home in Northern Ireland will now pay an average of £183,935, while in Scotland, average properties now cost £197,784.
London, which for some time has lagged many other areas of the UK in terms of house price growth, saw the cost of buying an average home fall from £541,472 to £530,396 in January, with annual house price inflation flat compared to +2.9% in December.
The price of a typical London home is still around a quarter of a million pounds above the UK national average.
UK home sales decreased in December 2022
HMRC monthly property transaction data has shown that UK home sales decreased in December 2022. UK seasonally adjusted residential transactions in December 2022 were 101,920 – down by 2.6% from November’s figure of 104,610.
Quarterly SA transactions from October to December 2022 were approximately 0.1% higher than the preceding three months. Year-on year SA transactions were 1.4% higher than December 2021.
Furthermore, the latest figures from the Bank of England have shown that the number of mortgages approved to finance house purchases decreased in December 2022 by 23% to 35,612. Year-on-year, the December figure was 51% below December 2021.
The December 2022 RICS Residential Market Survey results show further weakening in the sales market activity. The reading for new buyer enquiries came in at a net balance of -39%, marginally down from -38%.
Pace of annual growth is at its lowest in three years
Speaking on the January Halifax House Price Index, Kim Kinnaird, director, Halifax Mortgages, said: “The start of 2023 has brought some stability to UK house prices, with the average house price remaining largely unchanged in January at £281,684, a very small decrease on December.
“This followed a series of significant monthly falls at the end of last year (-1.3% in December and -2.4% in November). The pace of annual growth has continued to slow, to +1.9% (from +2.1% in December), which is the lowest level recorded over the last three years.
“The average house price is now around £12,500 (-4.2%) below its peak in August last year, though it still remains some £5,000 higher than in January 2022 (£276,483).
Lower house prices should lead to an improvement in home buying affordability over time
“We expected that the squeeze on household incomes from the rising cost of living and higher interest rates would lead to a slower housing market, particularly compared to the rapid growth of recent years. As we move through 2023, that trend is likely to continue as higher borrowing costs lead to reduced demand.
“For those looking to get on or up the housing ladder, confidence may improve beyond the near-term. Lower house prices and the potential for interest rates to peak below the level being anticipated last year should lead to an improvement in home buying affordability over time.”
The property market has remained resilient despite strong economic headwinds
Director of Benham and Reeves, Marc von Grundherr, also commented: “Given the strong economic headwinds that battered the UK following last September’s mini budget, it’s quite remarkable that the property market has remained largely impervious to any notable decline in house prices.
“With that storm now weathered and confidence returning to the market, the previous monthly house prices declines seen at the back end of last year have already amounted to little more than a seasonal cough and cold.”
