The average home is now worth £17,500 more than it was a year ago with prices ending the year 7.2% higher than 12 months ago, according to Zoopla.
However, growth has slowed significantly with prices having increased by just 0.3% in the past three months, data from the property website shows.
Looking ahead to 2023 Zoopla expects house prices to fall by up to 5% by the end of the year while prices in London could drop by as much as 8%.
The property platform also said demand for property in rural and coastal areas is fading as the race for space caused by the pandemic draws to an end.
It expects affordable urban areas and apartments to perform better than the rest of the market next year with places like Swindon, Coventry, Southend and Milton Keynes maintaining buyer interest.
But despite some markets holding up Zoopla found that overall demand has halved over the past 12 months forcing sellers to accept larger discounts on their homes.
Richard Donnell, executive director at Zoopla said: “2022 has been a strong year for the housing market with the second-strongest year for sales in more than a decade at 1.3 million.
“The fallout from the mini-Budget, with mortgage rates hitting 6.5%, brought the market to a near standstill in the last quarter.
“We expect buyers to return to the market in the new year, but they will be far more cautious and price sensitive.
“Serious sellers need to be realistic on price and get the advice of an agent on how to market their home.
“While mortgage rates will start 2023 lower, the impact on pricing will be felt more in the higher value markets of southern England than the more affordable markets elsewhere.”
Jack Roberts, CEO of home moving platform SlothMove, added: “Cost-of-living gloom and the prospect of a new year dominated by recession means heads are now ruling hearts in this market.
“For many buyers the game plan for the next few months will be to simply sit on their hands and wait to see how far prices move in their favour.
“The race for space has turned into a shuffle for stability as house hunters are increasingly shunning a place in the country in favour of tightening their belts in commuterville.
“While they may not be tired of London, negative growth suggests many people are fed up with its property values and looking to get the benefits of city living elsewhere.
“Yet, as wage increases continue to outstrip house prices, don’t be surprised to see the capital bounce back with a vengeance sooner than expected.”
