January 2023: Housing market set to slow in 2023 according to Halifax

Mon 16 Jan 2023

The latest ONS UK Price Index reveals that in September, average UK house prices increased by 9.5%, down from 13.1% the previous month. This made the price of an average home £295,000, an increase of £26,000 over the year but unchanged since August. The ONS attributed the fall in the September annual figure to the sharp rise last September due to stamp duty changes.

The latest Halifax House Price Index also records a fall in annual growth, down from 9.8% in September to 8.3% in October. Their figures show a 0.4% fall in prices over the month, with an average UK home losing around £1,000 in value to stand at £292,598. This slowdown is being seen across all four UK countries and all English regions except the North East.

Kim Kinnard, Director of Halifax Mortgages, points out that this is the third fall in average house prices seen in the last four months, but prices still remain very near to their record level. House prices have risen over 25% during the last three years which represents “significant” growth. However, he believes that the period of rapid price growth is now at an end. The recent rises in interest rates mean that mortgage affordability is reducing and, as a result, mortgage requests and approvals are in decline. He believes that, following the recent Autumn Statement, mortgage rates have probably peaked for the moment but many would-be homebuyers have put their plans on pause. First-time buyers are being particularly hard hit as saving for a deposit becomes increasingly challenging as the spiraling cost of living outstrips wage increases. This sector is also more likely to be affected by the tighter lending requirements for high LTV mortgages.

According to the ONS, the number of housing transactions in September this year was 36.8% lower than in the same month last year. This reflects the rush last September to complete before the end of the stamp duty discount at the end of the month. Wales continues to see the largest annual growth rate of 12.9% (down from 14.3% in August) and the North East has replaced London as the region with the lowest at 5.8% (down from 13.5%). London’s annual growth rate stands at 6.9% (down from 8.3%).

In the 12 months to June 2022, there were 396 transactions in Harrow, compared with 692 in the previous year. It's worth remembering that this first period (July 2020 to June 2021) includes sales activity which took place during the lockdowns, so comparisons can only be made with a pinch of salt. Looking forward, it is our expectation that sales in the next 12 months will inevitably be depressed due to interest rates and mortgage costs.

Looking ahead, Halifax believes that the UK housing market will continue to slow. As the country enters a period of economic recession, there is the prospect of rising unemployment. However, given the underlying shortage of property for sale in the UK, Halifax is uncertain as to what extent the state of the labour market will affect property prices.