The average UK house price growth rate slowed to 5.5% annually in February 2023, compared to 6.5% in January 2023 and 9.0% in December 2022.
According to the Land Registry House Price Index, the average price of a UK property was £287,506 in February 2023, which is £16,000 higher than 12 months ago but £5,000 below the recent peak in November 2022.
England experienced a 6.0% increase in average house prices over the 12 months to £308,000, while Wales saw a 6.4% increase to £215,000. Scotland had a smaller increase of 1.0% to £180,000, and Northern Ireland experienced the highest growth at 10.2% to £175,000.
On a non-seasonally adjusted basis, average UK house prices decreased by 1.0% between January and February 2023, while the same period 12 months ago saw a decrease of 0.1%. This contributed to the slowdown of the UK annual inflation rate.
Annual house price inflation was highest in the West Midlands at 8.6% in the 12 months to February 2023. London had the lowest annual growth in England at 2.9%, while Scotland’s annual inflation rate was lower at 1.0%.
The Royal Institution of Chartered Surveyors’ (RICS) February 2023 UK Residential Market Survey reported a decline in demand, marking the tenth consecutive negative monthly reading for new buyer enquiries. However, it is also the least negative result since July of last year.
The Bank of England’s Agents summary of business conditions for Q1 2023 reported a modest pick-up in secondary market activity and requests for valuations, but demand was broadly equal to the supply of properties available.
The UK Property Transactions Statistics revealed that in February 2023, on a seasonally adjusted basis, the estimated number of transactions of residential properties with a value of £40,000 or greater was 90,340. This is 18.2% lower than 12 months ago (February 2022). Between January and February 2023, UK transactions decreased by 4.1% on a seasonally adjusted basis.
The Bank of England’s Money and Credit February 2023 release reported that mortgage approvals for house purchases, an indicator of future borrowing, increased to 43,500 in February 2023, from 39,600 in January 2023. This marked the first monthly increase since August 2022.
Reaction
Kay Westgarth, director of sales at Standard Life Home Finance:
“The ONS’ monthly house price index always provides a dependable read on the current market temperature, and I imagine this edition won’t shock aspiring homeowners or industry commentators. Houses prices are falling, albeit in slow motion, and rising interest rates are dovetailing with cost-of-living pressures, meaning many first-time buyers will struggle to take that first step onto the ladder. Nevertheless, it’s always important to take the longer view when considering the housing market – the number of transactions are still higher than pre-pandemic market levels.
“While any changes to property prices will no doubt be a concern to people, the impact of the cost-of-living crisis on those over-55s on low or fixed incomes is likely to be a more immediate worry. Advisers have a valuable role to play in supporting customers and helping to ensure that they are exploring all the options available to help them manage the impact of the rising cost of living. The UK may have narrowly avoided a technical recession, but many people are still feeling the squeeze, and it’s important to be aware of the variety of later life lending products currently available that – in the right circumstances – can help people to boost their income, manage their borrowing and support their families.”
Tomer Aboody, director of property lender MT Finance:
“Fewer properties for sale tends to result in higher property prices, which seems to have been the case over the past year or so, with demand in the regions and for houses particularly strong.
“With mortgage rates fluctuating, particularly towards the end of last year, many buyers stalled, which meant a reduction in the number of transactions.
“Hopefully, as inflation falls and rates continue to stabilise, we will see more sales proceeding as buyers return and get their purchases back on track.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“Despite another small fall in prices month-on-month, the housing market is proving to be resilient. These are the most comprehensive of all housing surveys but the figures are a little dated, inevitably reporting on activity from a few months earlier when the market was in the doldrums.
“Since then, confidence has slowly improved in response to more choice and stabilising mortgage, if not base, rates.
“However, worries about inflation persist and buyers want to see value so are flexing their muscles before making decisions.”
Alex Lyle, director of Richmond estate agency Antony Roberts:
“February seems a long time ago now and the market moves on apace – over the Easter break we have had plenty of new enquiries with busy diaries this week and the weekend ahead. Now that the sun’s coming out, the housing market appears to be picking up accordingly.
“There is no single housing market with regional differences and variations within regions. Quality houses with desirable addresses continue to be well received by buyers, who are meeting, if not exceeding, asking prices. We are finding that prices in the £1.5m-plus family home market are holding well, with 98 per cent of the asking price on average being achieved in the first quarter of this year.
“The market for flats is not proving as strong as houses, with prices more sensitive due to less demand. It is essential that vendors price correctly and are not overly optimistic if they are to achieve a successful sale.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“The fall in inflation is welcome and means it is increasingly likely that base rate is near its peak.
“Despite the continued high cost of living, green shoots and resilience in the housing market are evident. Lenders expect tightening credit lines over the next three to six months but no credit crunch.
‘Pricing on new mortgages continues to trend downwards, providing welcome relief for borrowers, although the rate of falls is slowing. Borrowers who are unsure whether to take a product now or wait in the hope of cheaper rates in the future should seek advice from a whole-of-market broker.”
Scott Clay, Head of Introducers at Together:
“The fall in February’s house prices from 6.5% to 5.5% shows the current lack of consumer confidence in the market. Potential sellers, while keen to pursue property plans in what is typically a seasonally busier period, may be inclined to wait for further stability.
“However, that is not to say all activity is at a standstill. Buyers may be able to benefit from lower rates as inflation begins to start falling to lower levels than their peak last October,
“For those approaching mortgage renewals who don’t fit the criteria of high-street banks, it is essential to consider specialist lenders, as they can take into account individuals’ circumstances and offering more flexible borrower finances to help secure home ambitions.”
Bradley Post, managing director, RIFT Tax Refunds:
“After a surprise jump in February, the rate of inflation has once again started to ease, driven by a reduction in fuel costs, as well as many household outgoings.
“This will be warmly welcomed by those who continue to struggle with the higher cost of living but in some respects, it does unfortunately look set to get worse, before it gets better.
“With inflation proving more stubborn than anticipated, the Bank of England is expected to increase interest rates for a twelfth consecutive time next month, putting further strain on those who are already borrowing in order to get by.”
Iain Crawford, chief executive officer, Alliance Fund:
“So far this year we’ve seen a sustained appetite for new homes from the nation’s homebuyers, with new-build house prices generally moving against the wider grain of a cooling market.
“While there may be a pause for breath following the final Help to Buy deadline, we expect the new homes sector to shift through the gears as the year progresses, helping to keep the overall market afloat in the process.”
Nigel Purves, co-founder and chief executive officer, Wayhome:
“A marginal reduction in the cost of homeownership will be warmly welcomed by those who have been firmly priced out of the market during the pandemic house price boom.
“However, the unfortunate reality is that despite the recent drop in house prices, homeownership remains far beyond the reach of many aspirational buyers, who simply can’t afford the sky high costs associated with getting onto the property ladder.
“This issue has only worsened as the cost of borrowing has climbed in line with interest rates and we expect this additional financial pressure to further dampen market sentiment going forward.”
Jason Ferrando, chief executive officer, easyMoney:
“Higher interest rates have led to a more subdued level of mortgage market activity so far this year, which in turn, has caused the rate of house price appreciation to ease as the nation’s homebuyers tread more tentatively.
We expect this air of caution to remain as the Bank of England is expected to increase interest rates for the twelfth consecutive time in a row come next month, however, the market should continue to stand firm.”
Marc von Grundherr, director, Benham and Reeves:
“Higher interest rates have dampened the appetites of the nation’s homebuyers in recent months and so we’re no longer seeing the same feeding frenzy with respect to demand and supply imbalance of the market.
“As a result, buyers simply aren’t having to offer over the odds to secure their desired property and nor are they willing to, given the higher cost of borrowing. This has caused house prices to normalise but we’re yet to see any notable reduction as sellers continue to secure a fair price in current market conditions.”
James Forrester, managing director, Barrows and Forrester:
“The housing market is incredibly diverse and while there are certainly some areas where house prices have reduced notably of late, there are many pockets where the market has gone from strength to strength with little signs of slowing.
“Those considering a property purchase or sale would do well to ignore topline market statistics and the headlines they yield and instead focus on the performance of your local market when ascertaining just what price point to sell at, or to make an offer.”
Chris Hodgkinson, managing director, House Buyer Bureau:
“The property market has remained resolute for the large part and while house prices have softened, we certainly aren’t seeing a drastic downturn by any means.
“However, what we are seeing is a far greater level of market instability during the transactional process itself, with buyers and sellers being subjected to a greater degree of down valuations, chain-breaks and sales collapsing.”
Nicky Stevenson, managing director at national estate agent group Fine & Country:
“House prices held up much more strongly at the start of this year than people anticipated, as the market fought back from the disastrous Mini Budget.
“All signs point to a strong showing for the property market over the next few months, in what is traditionally a very busy period.
“Sellers are flocking back, with the ratio of new sales to instructions returning to pre-pandemic levels, and increasing stock levels is leading to a much healthier market overall.
“Inflation is proving more tenacious than expected, but it is still widely expected to fall sharply later this year.
“Crucially, first-time buyers are also back on the march, undeterred by the recent end to the Help To Buy Scheme. The rental market is proving increasingly competitive, and those who can afford to buy are choosing to instead take their first steps on the property ladder.
“Even though higher mortgage rates have reduced their buying power compared to last year, sellers are much more open to negotiate, particularly if they have interest from chain-free first-time buyers.”
Malcolm Webb, technical director at Legal & General Surveying Services:
“Though house prices have been correcting since October, the average property price tag is still 27% above its pre-pandemic level. The development of new mortgage products, and increasing lender competition, are helping to support demand in the market. However, although house price inflation is correcting from its pandemic peak, affordability does remain a challenge for many first-time buyers.
“In these challenging times, many buyers may look for ways to cut costs to get their purchase over the line. However, it is crucial that buyers do not sign on the dotted line without a surveyor reviewing the property first. A home survey can provide buyers with insights on any hidden issues which may prove costly in the future, providing peace of mind that there won’t be any surprises once they move in.”
Jamie Alexander, director at Southampton-based Alexander Southwell Mortgage Services:
“Average house prices continue to edge down on an annual and monthly basis. The property market is under real pressure and the stubborn inflation we have, remaining in double digits again on Wednesday, certainly won’t help. Another rate rise by the Bank of England is now more likely and this will affect both sentiment and mortgage rates, which drive the property market.”
Kundan Bhaduri, director of London-based property developer and portfolio landlord, The Kushman Group:
“These are testing times for the UK property market. All the economic uncertainty we have, and higher interest rates, have left many people hesitant to make big purchases such as a house. That reduction in demand then contributes to falling prices. The latest inflation data staying in double digits will further undermine confidence among prospective buyers and means another rate rise is now a nailed-on certainty. Of course, prices coming down also represents an opportunity for well financed professional property investors, as they can buy at a discount.”
Jamie Minors, managing director at Norwich-based estate agents, Minors & Brady:
“Though average annual prices continued to nudge down, in our experience demand is getting stronger by the day. The pendulum had swung from a sellers’ market to a buyers’ market, but now we are seeing a far more even relationship across all price levels. We had anticipated a drop in prices of around 5%-6% for 2023, however this correction in pricing has now settled down due to mortgage rates steadily reducing and buyer confidence returning due to the less pessimistic economic forecast.”
Lewis Shaw, founder of Mansfield-based Shaw Financial Services:
“House prices are gradually decreasing, but not in every part of the country, so any attempt to make predictions is for the birds. The bigger issue here is that many housing indices don’t take account of inflation, so whilst the data says the average home price stands at X, it’s unlikely this will factor in the double-digit inflation we’re currently blighted by. So does this make it a buyer’s or a seller’s market? At this point in time, neither. Yes, there is movement in asking prices because mortgage rates are still far higher than anyone has seen for a decade after the mini-budget. However, the bigger worry is stagnant wages. If you look at the cause of price falls, mortgage rates are one thing, but falling real wages due to inflation tearing through our economy is a far better predictor of falling prices than almost any other metric. If you want to know where your house price is going, look at average wages, not mortgage rates.”
Ross McMillan, owner at Glasgow-based Blue Fish Mortgage Solutions:
“Within the traditional property hotspots, demand is unwaveringly high, with supply nowhere near meeting this. Prices in the most sought-after areas are now showing signs of even greater increases than before. In competitive situations in these areas, after a brief hiatus in this practice towards the end of last year, I am regularly now hearing of 10%-20% above survey valuation almost becoming the norm again. Beyond these hotspots, the picture is certainly less clear with instances of offers accepted around or even below survey valuation more commonplace but overall confidence in the property market remains strong with buyer appetite seemingly unrelenting. Personally, I think nationwide house price growth will be minimal across the year, if not flat, but on an individual and localised basis there will be noticeable variations. There are significant discrepancies in how local areas are performing.”
Luke Thompson of King’s Lynn-based PAB Wealth Management:
“Conditions are considerably more positive in the property market than had been expected at the start of the year. At the minute, it’s a buyer’s market, with buyers able to get a fairly sizeable discount on the asking price for properties in my area. However, demand has remained fairly strong and people have definitely become more used to higher interest rates. Buy-to-let continues to be a problem area, with a number of my landlord customers looking to sell their properties at the minute due to higher interest rates and thus the reduced returns they are achieving. I think for the remainder of the year house prices will remain fairly flat. I feel that the south east and London may outperform other areas of the country and may see slightly higher house price growth.”
Austyn Johnson, founder at Colchester-based Mortgages for Actors:
“Swap rates have stabilised nicely and lenders are getting competitive again. This is a good indicator of confidence in their side of the market. Although some areas of the country have seen property values drop, others have stayed the same. We remain busy, which suggests many other brokers and estate agents are, too.”
Richard Harrison, head of mortgages, Atom bank:
“The latest data from the ONS highlights a slowing in house price growth, the third consecutive month that the average UK house price has fallen. It’s hard to see a recovery in prices materialising in the immediate term, with several factors 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 historically high house prices.”
“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.
“London is once again the English region with the lowest annual growth. There is a greater possibility of prices remaining more constrained here and in the south east, given these are the areas where affordability challenges are being most keenly felt by borrowers.”
“Home ownership is a long standing objective for many people, and we know life can’t always easily wait for mortgage prices to adjust. Borrowers should think carefully about their budget, taking into account their position today and how this could change in the future. For people looking to re-mortgage, they’ll undoubtedly face higher mortgage costs as their current fixed rate matures. Borrowers should review early, up to six months before maturity, to gain certainty on what their next deal will be. It’s difficult to predict how mortgage pricing will evolve so there’s benefit in securing the certainty of a new deal sooner rather than later.”
