Average UK house prices rose by 6.3% in the 12 months to January 2023, down from a 9.3% increase in December 2022, with the average house price standing at £290,000, £17,000 higher than a year ago.
ONS analysis shows that in England, average house prices increased to £310,000 (6.9%) over the 12 months, while prices in Wales rose to £217,000 (5.8%), in Scotland to £185,000 (1.0%), and in Northern Ireland to £175,000 (10.2%).
Scotland’s annual house price inflation has generally been slowing since its peak of 13.8% in the 12 months to April 2022, dropping to 1.0% in the 12 months to January 2023.
The North East experienced the highest annual percentage change of all English regions in the 12 months to January 2023 (10.0%), while London saw the lowest (3.2%).
London’s average house prices remain the most expensive of any region in the UK, with an average price of £534,000 in January 2023.
ONS data for January 2023 shows that the provisional seasonally adjusted estimate of UK residential transactions was 96,650, a 10.6% decrease from January 2022 and a 2.6% decrease from December 2022.
Monthly house price inflation in the UK is calculated using data from HM Land Registry, Registers of Scotland, and Land and Property Services Northern Ireland.
Reaction
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“January was a miserable month for property. Three months on from the peak of mortgage rates in October, the horror of higher mortgages fed through into falling prices. Prices were down more than 1% in a month, and annual growth is now just 6.3%. We can expect more weakness from here, as prices continue to fall, but the jury is still out on how low things will go.
“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, and the Office for Budget Responsibility expects them to drop 10% from the peak. The Nationwide and Halifax indices are more up-to-date because they measure the prices of agreed sales, and their most recent measures show prices have fallen between 3% and 6% from their high point.
“Most of the forward-looking indications don’t look brilliant either. The Bank of England said that in January the number of mortgages approved for purchases in coming months fell for the fifth month in a row, and excluding the onset of the pandemic – when the market was effectively closed – it’s the lowest level of approvals since 2009. Meanwhile, Zoopla has found that home sellers are cutting prices by an average of £14,100 – or 4.5% to shift their properties, and RICS continues to chart the fall in demand from buyers.
“If you’re planning to buy, the likelihood of falling mortgage rates and falling prices may persuade you to put off a purchase. If you can’t afford to wait, then it will be even more important to shop around for the best possible mortgage deal – and negotiate hard on price to protect yourself from price falls in the coming months.”
Steve Rayers, surveying director at Legal & General Surveying Services:
“Despite a somewhat difficult and uncertain economic climate, house prices remained broadly stable in January. When it comes to property prices though it’s important to take the long view, and overall property values are higher than they were last year and the market is resilient. Given owner occupiers will spend an average of over 17 years in their home, these long-term trends are far more important to homeowners than month-on-month fluctuations.
“While the resilience of the market will come as a relief to homeowners, first time buyers may still struggle to access the property ladder. Affordability is an increasingly key concern in this market, and many will understandably exercise caution when buying a property, which will likely be the largest purchase of their lives.
“In this climate, expert advice is more valuable than ever. A pre purchase survey carried out by a professional member of the Royal Institution of Chartered Surveyors (RICS) is vital to help potential homeowners gather as much information as possible before signing on the dotted line. This will not only protect new buyers from any unexpected costs or issues in the future, but it can even help them negotiate on price.”
Conor Murphy, CEO and founder, Smartr365 and Capricorn Financial Consultancy:
“Aspiring buyers will be pleased to see some of the heat coming out of the property market. UK homes have always been hot property for both domestic and international buyers, but even more so in the last three years due to the generous stamp duty tax break. Many expect the market to continue to cool off throughout the year, with estimates typically ranging between corrections of 8% (Halifax) and 5% (Nationwide). With prices having risen by 6.3% over the year to January, this will be welcome relief for those looking to take their first step onto the property ladder.
“Notwithstanding this, analysis of Land Registry data suggests that the largest uplift in transactions typically occurs in spring, creating an annual market ‘bounce’. Firms must invest in back-end processes now to maximise the imminent uptick in demand. Streamlining admin, lead flow, and product sourcing through the use of mortgage tech tools will be essential for anyone looking to provide consumers with the best possible service during this busy period.”
Alex Lyle, director of Richmond estate agency Antony Roberts:
“When it comes to how well prices are holding up, much depends on the property in question. Prices on freehold houses with A-star addresses at the upper end of the market are actually rising as demand for quality family homes outstrips supply.
“But when it comes to flats, the market is much tougher. Agents are being cautious with their valuations as there is less demand and where there is demand, buyers are battling with affordability as rates rise and the cost of living continues to be a concern.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“The shock uptick in inflation after three months of falls may ring alarm bells for the Bank of England and makes another increase in base rate this month more likely.
“Swap rates, which underpin the pricing of fixed-rate mortgages, have been falling again in recent weeks, and a number of high-profile lenders have reduced fixed rates accordingly.
“Borrowers may be tempted to wait for rates to fall further but there is a danger that they might not and trying to predict interest rates can be a dangerous game as the volatility around inflation suggests. Seeking advice from a whole-of-market broker as to the options available is crucial.”
Carl Howard, group CEO of Andrews estate agents:
“This record-breaking annual rental price rise of 4.7% speaks to the strong competition for new lets, as well as the shortage of supply.
“The current mismatch between population growth and house building is continuing to stoke demand for rental properties, particularly in cities and commuter hubs.
“Another big factor has been the growing pressure on landlords, hit by the spiralling cost of living and increased mortgage rates — a legacy of the autumn Budget. With double-digit inflation continuing to lift their costs across the board, many buy-to-let owners are struggling to justify holding onto investment properties.
“Government legislation and some clumsy ‘us versus them’ rhetoric, particularly around the planned strengthening of renters’ rights, has also helped drive a good number of smaller landlords out of the market.
“This exodus must be halted — and more rental properties brought to market — or prices will keep on rising. In the meantime let’s hope the Punch and Judy politics of the private sector can be replaced with something far more constructive, for landlords and tenants alike.”
Alan Davison, personal finance distribution director at Together:
“With the OBR optimistically predicting inflation will fall to 2.9% by the end of 2023, we should see recent volatility across the mortgage market start to settle.
“What’s more, those needing to remortgage this year may also see benefit in exploring new opportunities now, given the overall 2- and 5-year fixed average rates have now dropped to their lowest levels in the last six months.
“Managing mortgage repayments and factoring these into other outgoings will continue to be a priority for households. Here, specialist lenders are in the best position to help, taking into account an individual’s personal and financial circumstance on a case-by-case basis and offering more flexible criteria.”
Jamie Alexander, director at Southampton-based Alexander Southwell Mortgage Services:
“The property market is under real pressure and the stubborn inflation we have, remaining above 10%, won’t help. Now all eyes are on whether the Bank of England reacts on Thursday and decides to raise interest rates yet again. This will affect borrowers on trackers and the wider property market if it subdues demand further. A lot is riding on this week’s Bank of England rate decision as it will affect sentiment and mortgage rates, which drive the property market.”
Kundan Bhaduri, director of London-based property developer and portfolio landlord, The Kushman Group:
“Right now is without doubt the single best buying opportunity in the UK property market we have seen since 2008. The depressed sales market is favouring professional portfolio landlords in particular, who are active and buying properties at a significant discount compared to prices this time last year.”
Louis Mason, director of London-based mortgage broker, Oportfolio:
“Though prices are coming down, demand for property in recent months has been surprisingly strong, specifically from first-time buyers, supported by the fact that many sellers are being more realistic with their asking prices and the jobs market is holding up. Lower prices are stimulating demand and reigniting the market.”
Mike Staton, director of Mansfield-based mortgage broker, Staton Mortgages:
“The problem with the housing market at the moment is that buyers think it is 2008 and sellers think it is 2020. Both are wrong. This is not being helped by overzealous estate agents that still continually choose to over-value properties. The one thing that is needed to sort out this mess is for the government to step in and regulate the estate agent industry and make them answerable to the mis-selling techniques that many of them still practice. I’ve seen more realism in a Nicolas Cage movie than some property valuations being carried out”
Will Rice, CEO of residential mortgage lender, Generation Home:
“We expect house prices to stabilise throughout 2023. The majority of the correction has already happened, and while there may be a little room left to fall, it won’t be much. Inflation will be the key driver of the housing market in the near future. It will determine what the Bank of England decides to do with the base rate, which will directly pass through to mortgage rates and housing costs, which in turn will affect the level of demand from buyers, determining house prices. If you’re in the financial position to be able to buy, now could be a good time to be in the market. If prices do stabilise throughout the year, we might see demand increasing and more properties listed, creating competition between buyers.”
Nick Harris, co-founder at Wokingham-based Quarters Residential Estate Agents:
“Property prices are down but demand has been steadily increasing in the first three months of the year. There’s more confidence out there than many think. This shows that while discretionary buyers are sitting tight, the serious buyers remain active. Sellers are being much more realistic on price, and are typically also buyers so they appreciate a more balanced property market. Locally, we don’t expect to see the often reported ‘crash’ but can certainly see that a correction of circa 5% is realistic. It’s no secret the market is currently favouring buyers.”
Rohit Kohli, operations director at Romsey-based mortgage broker, The Mortgage Stop:
“Though last year’s mini-Budget was a pivotal moment, the higher cost of living, higher interest rates and general uncertainty surrounding the economy meant confidence among buyers was bound to fall and the ongoing fall in average values highlights this. The buy-to-let sector has been the worst hit. Confidence has been knocked out of landlords and they are selling up at scale as higher mortgage rates and lower affordability from lenders mean their numbers are no longer stacking up.”
Riz Malik, director of Southend-on-Sea-based R3 Mortgages:
“Thursday’s inflation data will only add to the very visible woes of the housing market. All eyes are now on the size of any future base rate increases, starting on Thursday. If we can maintain some sense of stability until the summer, a sharp drop in inflation could restore confidence and provide the property market with the stimulus it needs.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“A slowdown seemed inevitable after house prices rose so far and so fast, but was accelerated by last September’s mini-Budget. The impact of this is still to fully play out.
“Although reflecting what was happening a few months ago, this most comprehensive of all property market surveys broadly confirms what we’ve been seeing in our offices recently. The reasons for moving haven’t disappeared as buyers are slowly returning encouraged by falling mortgage rates.
“Although viewings are up, sales conversions are harder due to more choice and increased buyer caution.”
Tomer Aboody, director of property lender MT Finance:
“Annual house price growth is slowing, demonstrating less positivity in the market due to higher rates and affordability concerns created by the cost of living. We expect this slowdown to continue until rates stabilise.
“The market may benefit from further stimulation, perhaps in the form of the reworking of stamp duty. Banks remain keen to lend and many buyers still want to make a move, so such an impetus may persuade them to take the plunge.
“With the biggest increases in house prices rather than flats, this further cements the priorities for buyers, with space being key.”
