The average price of a house in the UK increased by 9.8% in the 12 months to December 2022, down from 10.6% in November 2022, according to the latest ONS figures.
At £294,000 prices were some £26,000 higher than 12 months previous but down slightly on the month before when prices stood at a record high of £296,000.
Regionally house prices increased over the 12 months to £315,000 (10.3%) in England, £222,000 in Wales (10.3%), £187,000 in Scotland (5.7%) and £175,000 in Northern Ireland (10.2%).
Scotland’s annual house price inflation has generally been slowing since April 2022, reaching 5.7% in the 12 months to December 2022, down from 13.9% in the 12 months to April 2022.
The East Midlands saw the highest annual percentage change in the 12 months to December 2022 (12.3%), while London saw the lowest (6.7%) of all English regions.
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Malcolm Webb, technical director at Legal & General Surveying Services:
“Although house prices fell slightly this month, property values are still higher than last year and market activity remains steady.
“Even with this slight decline in house price growth, affordability remains a key issue across the property market, which makes expert advice more valuable than ever. A professional survey is vital to help potential homeowners gather as much information as possible before purchase. This will protect buyers from any unexpected costs or issues.”
Andy Mielczarek, founder and CEO of SmartSave Bank:
“House price growth was clearly slowing by the end of last year. But it is crucial we remember that the ONS’s house price data tracks a couple of months behind other indices, most of which are suggesting that prices are now in decline. Indeed, perhaps the headline from the ONS data was that the average UK house price dropped by £2,000 between November and December 2022. As a combination of the cost-of-living crisis and rising interest rates dampens buyer demand, the question is just how far will house prices fall?
“Those looking to move home, or take their first step onto the property ladder, will be watching on with great interest. No doubt, many will sit tight in the hope that prices become more and more affordable over the coming months. But in the meantime, they must be diligent in how they are managing their own finances, particularly their savings.
“While keeping a keen eye on price movements, would-be buyers could also focus on building up their deposit. Right now, we are seeing great interest in one- and two-year savings accounts which, thanks to rising interest rates, are now providing increasingly attractive rates to those ready to put aside some or all of their cash savings to allow it to gain value. If indeed house prices continue to slide, those who use this time wisely to boost their savings will find themselves in a stronger position when they choose to enter the market.”
Vikki Jefferies, proposition director at PRIMIS Mortgage Network:
“Despite house prices declining from the record highs seen in 2022, the figures today should provide buyers with some confidence in that they remain well above pre-pandemic levels.
“Furthermore, demand should continue to outstrip supply in the coming years, making any drastic fall in prices less likely.
“However, brokers must recognise that inflation continues to present many consumers with significant day-to-day financial challenges, and it is essential to understand the individual needs of every client to find the most suitable product for them during this period.
“This means investing appropriate resources into KYC, fact-finding and CRM systems to ensure brokers are working with their customers every step of the way.”
Angela Hesketh, director of conveyancing transformation at Smoove:
“Today’s figures underline the adverse effects of rising interest rates, economic pressures, and seasonal challenges seen towards the end of last year.
“It is, however, worth remembering that this data shows a slowdown in house price growth year-on-year, and not an actual fall. Looking ahead, we hope there will not be the dramatic slump that some observers would have us anticipate but more of a correction.
“House prices remain strong overall, as today’s findings show, and with some mortgage lenders expanding their offering and reducing rates, the market appears to be in the process of readjusting and settling into its new stage.”
Mark Harris, chief executive of SPF Private Clients:
“Inflation dipping for the third month in a row to 10.1 per cent will help ease some pressure on the Bank of England but a quarter-point increase in base rate next month is most likely still on the cards.
“Back in December, both Swaps and fixed-rate mortgages were rather higher than they now, as a result of the fallout of the mini-Budget.
“Much of that turmoil has passed through the system, with 5-year fixes dropping below four per cent as servicing pressures subside and lenders remain keen to generate new business.
“Those buyers who have been sitting on their hands may be encouraged to take the plunge now fixes are looking increasingly palatable.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“Clearly, the direction of travel of the housing market is no longer strongly up but it’s not sharply down either.
“These comprehensive but dated figures lay bare the impact on prices of the ill-fated mini-Budget in the fourth quarter of last year.
“On the ground since, we are finding that buyers still have an appetite.
“However, they are increasingly flexing their muscles and adjusting to an improving bargaining position as stabilising mortgage rates and inflation bring more balance.”
Charlotte Nixon, mortgage expert at Quilter:
“This morning’s UK house price index shows house prices dipped by a rather muted 0.4% in December 2022 in comparison to the month prior.
“While prices have slowed somewhat over the last few months, the annual price rise remains at 9.8% and the average UK property now costs £294,329.
“A further drop in house prices comes as little surprise, though it is likely some would have expected a larger fall by this stage.
“The ongoing cost-of-living crisis continues to put a real strain on millions, and increased energy bills – which have not been helped by the cold snaps seen in recent weeks – will likely worsen as the winter draws on.
“This pressure on our everyday finances could put a temporary halt to people’s plans to move, particularly given the added expense that comes with it.
“While the latest inflation figures show it is finally starting to head in the right direction with a slight dip month on month, this will not immediately lighten people’s financial load.
“When coupled with people needing to sell up their homes to avoid financial hardship leading to increased supply, the high cost of living could see demand dwindle and house prices could fall further as a result.
“However, the Bank of England’s latest interest rate hike to 4% has done little to mortgage rates, and some fixed rates are even beginning to come in under the base rate as lenders compete for new business and to retain their existing clients.
“While the lowest level fixed rates are only available to those with sizeable deposits or high levels of equity, as we move further into 2023, declining mortgage rates and lower house prices could well start to entice people who previously put their plans on hold to reconsider their options.
“If this is the case, house prices may not fall as much as originally feared.”
James Briggs, head of personal finance intermediary sales at Together:
“House prices have continued to follow the downwards trend in December, with prices falling from 10.6%% to 9.8%.
“With inflation still over five times the Government’s 2% target and the Bank of England continuing to raise interest rates in response, borrower’s concerns will still be palpable and may delay some first-time buyers from taking that first step onto the ladder.
“However, it’s important to note that while times are uncertain, due to previous lender price considerations the impact to actual prices should be minimal and rates will probably start falling in the next six to 18 months.
“For those looking to remortgage soon, it may be worth considering a variable (tracker) mortgage.
“As high street lenders increasingly tighten their lending criteria in response to a recessionary period, now is the right time to consider a specialist mortgage lender who can assess your personal circumstances and help you unlock your property ambitions.”
Felicity Holloway, head of mortgages at Moneybox:
“While we’ve seen house prices year-on-year steadily increasing, we are beginning to see this change, as today’s figures show that average house prices in the UK increased by 9.8% in the 12 months to December 2022, down from 10.6% in November 2022.
“A fall in annual house prices is expected as cost-of-living pressures continue to squeeze incomes, weaken consumer confidence and ultimately slow the market.
“The slow-down we’re currently seeing in the property market is impacting people across the board in many different ways: we’re seeing first-time buyers caught in a dilemma of whether to capitalise on the declining house prices despite the rising cost-of-living eating into their finances.
“Interestingly, at Moneybox we saw 24% more Lifetime ISA house purchase withdrawals in Dec 2022 than Dec 2021 indicating that first time buyers who have saved their deposit, were not hugely influenced by the market fluctuations in the latter part of the year.
“We’re also seeing some aspiring homebuyers who are waiting for the market to slow down even further before making a house purchase and current homeowners opting to remortgage rather than move home in a bid to stabilise their finances – which could subdue market demand even further.
“Historically property has always been a sound investment, but no one can predict the future. FTBs should be reassured that there are many factors that influence whether any individual property is a good investment over the long term.
“It’s important to seek professional mortgage advice, especially during this time. Brokers will help figure out exactly what they can afford – both from a purchase price and a monthly mortgage payments point of view – and help minimise the stress around homebuying, allowing people to make an offer quickly and with confidence when they find something that they like.
“It’s also always worth looking into Lifetime ISAs to help you save as big a deposit as possible.
“A Lifetime ISA offers a 25% Government bonus on every £1 saved up to £4000 each year so the earlier you start to save, the more ‘free money’ you can get to boost deposit and reduce your mortgage.”
Gareth Lewis, commercial director of property lender MT Finance:
“These end-of-year stats reflect completed transactions that were put into play a good few months before so we are still not seeing the full mini-Budget fallout and impact that will have had on buyers trying to push prices down.
“Year-on-year transactional volume for the past two years is roughly the same, with all the signs suggesting that this year will be slower as a result of interest rate rises and squeezed affordability.
“In order to return to the volume of transactions seen in 2018 and before will require some reform of stamp duty or similar to encourage people to buy, particularly when mortgages cost more.
“While there isn’t enough supply coming to the market, there won’t be enough transactions flowing through the system to generate the level of revenue the government will be looking for.
“We are likely to see more regionalised changes in prices this year.
“There were some over-inflated areas post-Covid as people wanted to move out to the suburbs and further afield, pushing up values where demand was high.
“As more people return to more usual working environments, that will have an impact on values in those areas.”
Richard Harrison, head of mortgages at Atom bank:
“The latest data from the ONS highlights a slowing in house price growth, with the average UK house price increasing by 9.8% in the 12 months to December 2022, down from 10.6% in November.
“The latest data broadly aligns to the trends reported in the Halifax and Nationwide house price indices, which point towards prices cooling over the near term.
“It’s hard to see a recovery in prices materialising in the immediate term.
“Several factors are creating a downward pressure, such as wages falling in real terms due to high inflation and many facing the challenge of raising a deposit due to the ongoing cost of living crisis and recent house price growth.
“More positively, headline mortgage pricing has fallen during 2023, which will provide some support to customers’ affordability through lower monthly mortgage repayments.
“Prices have adjusted slightly on the back of affordability pressure, but a more pronounced change should be avoided on the grounds that employment levels remain steady, which should avoid any widespread forced selling.
“With today’s data showing London to be the English region with the lowest annual growth, there is a greater possibility of prices here and around the South East remaining more constrained because these are the areas where affordability challenges are being most keenly felt by borrowers.”
Mark O’Hara, enterprise sales manager and in-house Right to Rent expert at ID-Pal:
“Many people have been pushed into renting by rising interest rates that have made affordability more difficult when assessing wages versus repayments.
“These rate increases have also caused some landlords to exit the market or pass on their tax hikes to renters.
“Increased rental prices, along with high demand for rental properties coupled with falling supply has created unpredictability in the market; causing the average rental prices to soar, as demonstrated by today’s data.
“As rental stock dwindles and the need grows, letting agents and property managers, should look to digital solutions available to manage this market uncertainty and gain confidence in their decisions.
“Using technology – such as a digital identity service provider (IDSP) – to streamline the rental application process will help agents boost their operational efficiency, identify fraud at source and enable them to process more applications with better results.
“The process to conduct Right to Rent checks has stringent guidelines on how to be compliant and given the pressure in the market, this is when mistakes can happen.
“An inaccurate Right to Rent check can be costly too – up to five years in prison or an uncapped fine. However, using digital tools ensures accuracy and compliance.”
