In November, house prices were down 2.3% in a month to an average of £285,579, according to the latest Halifax House Price Index.
Overall almost £7,000 was wiped off house prices as the UK registered its third consecutive month of price falls and the largest since the financial crisis in 2008.
But average prices are still £12,000 higher than this time last year, and £46,403 higher than the month before the pandemic (March 2020).
Kim Kinnaird, director, Halifax Mortgages, said: “Average house prices fell in November as the rate of annual growth slowed further to +4.7% (from +8.2%), with the typical UK property price now sitting at £285,579.
“The monthly drop of -2.3% is the largest seen since October 2008 and the third consecutive fall.
“While a market slowdown was expected given the known economic headwinds – and following such extensive house price inflation over the last few years (+19% since March 2020) – this month’s fall reflects the worst of the market volatility over recent months.
“Some potential home moves have been paused as homebuyers feel increased pressure on affordability and industry data continues to suggest that many buyers and sellers are taking stock while the market continues to stabilise.
“When thinking about the future for house prices, it is important to remember the context of the last few years, when we witnessed some of the biggest house price increases the market has ever seen.
Property prices are up more than £12,000 compared to this time last year, and well above pre-pandemic levels (+£46,403 vs March 2020).
“The market may now be going through a process of normalisation. While some important factors like the limited supply of properties for sale will remain, the trajectory of mortgage rates, the robustness of household finances in the face of the rising cost of living, and how the economy – and more specifically the labour market – performs will be key in determining house prices changes in 2023.”
The slowing market is reflected across the UK, with most nations and regions seeing the rate of annual house price inflation fall last month.
The only exception remains the North East of England, which saw its rate of annual growth edge up slightly to +10.5% (from +10.4%). It’s also now the only area of the UK with annual house price inflation in double figures, with an average property price of £173,587.
Wales (+7.9%, average price of £220,689) and the South West (+8.4%, average price of £307,750) have seen the sharpest slowdown of annual growth (from +11.5% and +10.7% respectively).
This is notable given both were key hotspots of house price inflation during the pandemic, suggesting that previous drivers of the market such as the race for space and heightened demand for rural living are now receding.
Scotland has also seen its pace of annual house price inflation continue to slow, now at +6.5% (from +7.4%) with a typical property now costing £203,132.
House prices in Northern Ireland are up +9.1% year-on-year, easing back from +9.7% last month, with an average property price of £185,097.
The pace of annual property price inflation also slowed in London, which continues to lag the other UK regions and nations. House prices have risen +5.2% over the last 12 months, down from +6.6%.
The average property price in the capital remains well above the UK average at £549,160.
Reaction
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown:
“Things have officially gone from bad to worse in the property market, with the biggest monthly price drop since the financial crisis of 2008. We’re not yet in the realms of annual price falls, but if this pace continues, it won’t be long until we are.
“What’s even more worrying is that it takes around three months for a sale to move from being agreed to being completed, so these figures reflect sellers’ decisions in August – before the disastrous mini-budget. It means that buyers were already getting cold feet before Kwasi Kwarteng’s announcement forced mortgage rates through the roof.
“Since then, the fallout from the mini-Budget mayhem has been a catastrophic loss in confidence. Even though mortgage rates are starting to fall again from the peaks, we’re still seeing sales fall through, while new buyers and sellers decide to bide their time. RICS figures show buyer demand is still sliding, and lower mortgage approval figures from the Bank of England show that it’s unlikely to bounce back in the short term.
“Market confidence has plummeted, and nobody is in a hurry to buy in a falling market. The fact we’re highly likely to be in a recession is only going to make people less confident about splashing out on a new home. So as bad as these figures are, things could get even worse as we go into 2023.”
Nicky Stevenson, managing director at national estate agent group Fine & Country:
She said: “Rising interest rates have stretched buyer affordability and caused prices to cool.
“Amid the current cost-of living crisis, people are having to spend more time than ever managing household balance sheets, and many will be reluctant to add to the challenges they already face by taking on high-interest debt. Inflation is expected to peak by the end of 2022 before falling back to around 3.4% over the course of 2024.
“While the mortgage market is now beginning to stabilise following the turmoil caused by the mini-budget, there remains an expectation that the Bank of England will continue to nudge its base rate higher as it seeks to tame inflation. Swap rates have returned to levels lower than in the immediate aftermath of the Growth Plan but the consensus is that mortgage rates of between 5% and 6% may become the norm.
“Against this backdrop, we expect momentum in the housing market to remain subdued as we approach the New Year.”
Jack Roberts, CEO of home moving platform SlothMove:
“There will be no managed decline for the property market. House prices are rapidly fading and we’re now facing a chaotic toboggan ride to the bottom.
“The biggest monthly drop in 14 years reflects a lack of confidence from buyers who are quite prepared to sit on their hands this winter and wait for the market to move closer to them.
“And the longer they bide their time, the more likely it is for sellers to become disheartened and also step back from the fray. It’s a game of poker where the two main players have both left the table.
“The dip in borrowing rates below 6% could persuade some house hunters back into the fold, but the high cost of living remains a huge deterrent to pursuing a mortgage. With the UK sliding into recession and unemployment expected to rise, the decision to buy could be taken out of many people’s hands.”
Iain McKenzie, CEO of The Guild of Property Professionals:
“Today’s figures confirm what the industry has been seeing on the ground – house prices are falling, but not at the dramatic rate we might have expected after the recent economic upheaval.
“It’s important to keep a sense of perspective and remember that property prices soared massively during the pandemic, meaning that these decreases are minor in comparison. The average home is still worth £45,000 more than it was in March 2020.
“The limited supply of housing is one of the main factors keeping the reins on falling prices. The unprecedented demand we have seen in the last couple of years has meant that estate agents have been scrambling to replenish their stock.
“The cost of living crisis will be the determining factor to control house prices in the months ahead. Mortgage affordability, as well as living costs, will affect how confident buyers are when it comes to committing to buying a new home.
“With nearly one in three property purchases ‘needs-based’ due to changing personal circumstances, the market will not grind to a halt, but pricing will be paramount to achieve a sale as the market swings back in the favour of buyers.”
Hannah Bashford, director of Devon-based broker, Model Financial Solutions:
“Everyone has checked out for Christmas. We’re seeing most people adopt a wait-and-see and let’s-look-seriously-in-January attitude.
“This has stopped the market in its tracks and it’s no wonder house price growth has slowed.
“Surveyors are cautious and down-valuations are becoming more common, which will trickle through to estate agents and cause price adjustments.
“This is not a bad thing, as house prices have been overinflated since the pandemic and to ensure first-time buyers have a chance of buying by the time they’re 37 — the average age of a first-time buyer — prices had to come down. January is going to be busy when all the festivities are over and people want a project for the New Year.”
Zaid Patel, director at London-based estate agents, Highcastle Estates:
“The mini-Budget came at the worst time. Sales activity tends to drop towards the end of the year anyway, and the mini-Budget meant transactions dropped even more sharply. People are now making offers as low as possible to get the best deal.
“Unfortunately, I can’t see much activity in December. However, estate agents will need to polish their negotiating skills for January as many buyers will offer 15% lower than the asking price. By then, sellers will be seriously reevaluating how much their house is worth in the market.”
Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial:
“It’s not a buyers’ market, it’s not a sellers’ market, there’s barely a market at all. Transaction levels will dry up faster than a bar during the England v France match this weekend as the next six months see a battle of the wills between sellers trying to get what they think their property is worth and buyers realising a catastrophic crash is on the horizon.
“By spring we should see prices 20% lower and rates starting to come down, following this diabolical strategy from the Bank of England continuing to increase rates into the new year. Then it will be a buyers’ market as the doors reopen to trade.”
Rob Gill, managing director at mortgage broker Altura Mortgage Finance:
“After the chaos, uncertainty and huge spike in mortgage rates caused by the infamous mini-Budget, it’s no surprise at all that buyers have pulled back from the market. With markets only starting to calm down and mortgage rates falling in November, it’s also no surprise that buyers are now putting off their search until after Christmas.
“The first proper Christmas people have been able to celebrate for three years, coupled with a winter World Cup in which England are playing well, people have every excuse to take a well-earned break and put off their property search until January.”
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com:
“A house price crash has already begun in my opinion. The ONS recently predicted a 9% fall in property prices over two years. And the rest. We’re already a quarter of the way there in the past two months.
“There seems to be a lot of wishful thinking and self-delusion from vested interests, downplaying the severity of the falls coming. I think it’s increasingly likely we’ll see at least a 15% decrease in 2023 and 25%-30% over the next two to three years.”
Michael Webb, managing director at Brandon-based Mortgage Republic:
“Christmas has come early, and not in a good way. October’s purchase business slowed, and November felt like a December, which is always a quieter time as focus shifts to Christmas in the economy.
“The house price indices are showing a clear reduction in values, but with the delays in completions, and six-month mortgage offers a lot of the deals completing now are not on the new normal rates, but from legacy mortgage offers.
“With properties continuing to be listed on Rightmove in decent numbers for this time of year, and demand for them falling, the perfect storm is forming for a serious readjustment in values, which only goes to amplify the desire to hold and wait from buyers. These indices will be a lot more interesting come late spring 2023.”
Craig Fish, managing director at mortgage broker Lodestone:
“It’s very clearly a buyers’ market out there right now and the situation for buyers will only improve as we go into next year, given that some landlords are selling up due to lack of profitability.
“As more stock arrives, prices will reduce further, and the buyer’s position improves. I anticipate a slow December, although we are still seeing activity at the moment.
“I expect house prices will drop by no more than 10% over the next year, which would be good for first-time buyers who are the lifeblood of the mortgage market, and this small correction is just what the market needs. I’m feeling positive for next year and it’s beginning to feel a lot like Christmas.”
Justin Moy, founder at Chelmsford-based mortgage broker, EHF Mortgages:
“The market has cooled these past few months, with mortgage applications plummeting as everyone waits for better products to materialise. Whilst there are cheaper tracker deals, fixed rates continue to be the preferred choice of clients, and thus the mortgage slowdown will continue until the end of the year.
“Higher mortgage rates impact affordability, so once that eases, we should see confidence increase. Landlords are just waiting for potential bargains, possibly from other landlords exiting their market.
“Some of that demand is driven by lower rates, as that will allow landlords to borrow more with smaller deposits. Property prices may roll back to their equivalent values around the start of 2021, namely a reduction, but far from a disaster.”
Rhys Schofield, managing director at Derbyshire-based mortgage advisors Peak Money:
“Scratch the surface and it’s not the post-apocalyptic house market wasteland some would have you believe.
“Yes, we are shifting away from a world of 10% annual house price increases but that’s probably a positive for normal people, and we’ll likely see a rebalancing of the market by around 10% next year. Again this is probably good for normal people’s back pockets.
“Smaller mortgages are good for you after all. Also, for all the doom and gloom, the market goes quiet at Christmas or when England are at the World Cup.
“What it feels like at the coal face is that the normal end-of-year lull came early thanks to the uncertainty around the Autumn Statement but January is shaping up to be very brisk indeed.”
Jonathan Burridge, founding adviser at hybrid mortgage adviser, We Are Money:
“We are not at the start of a free fall in property values. Prices are softening and it is the first time in a while where there are fewer buyers willing to outbid one another. Where the market will settle is pure guess work but prices will recover because there remains demand while lenders are signing the cheques.”
Tomer Aboody, director of property lender MT Finance:
“With another fall in property prices in November, buyers and sellers are clearly demonstrating more caution due to higher mortgage rates and the ever-rising cost of living.
“As with any fall in pricing, buyer sentiment and confidence is key. But considering the macro-economic and seasonal factors affecting all consumers, along with the month-on-month increases seen over the past 18 months or so, the decline needs to be put into context as it is still minimal.
“With fewer transactions taking place, it will be interesting to see whether the government will takes steps to encourage more activity in order to boost the wider economy, and whether mortgage lenders are willing and able to be more flexible on criteria.
