February 2023: Context is key in the light of predicted house price falls

Wed 25 Jan 2023

The Halifax November House Price Index records a continuation in the downward trend of average house prices with a drop of 2.3% over the month. This is the third month in a row that prices have fallen and the largest monthly fall since 2008. It takes the annual growth rate down to 4.7%, a significant fall from the October figure when it stood at 8.2%.

Rightmove also reports a softening in the housing market, with their December index showing a decrease in asking prices of 2.1%. They comment that this is a larger than usual fall for the time of year as many vendors are now pricing “aggressively” in order to sell. Overall, asking prices for homes in the UK rose 5.6% in 2022, compared with 6.3% in 2021.

Kim Kinnaird, Director of Halifax Mortgages comments that a slowdown in the housing market was not unexpected in light of the rapid growth in property prices over the last couple of years and the economic difficulties that the UK is currently experiencing. She points out that house prices have risen by 19% since March 2020 and remain £12,000 higher than just one year ago. The current fall in prices should be seen as a process of “normalisation” after a very unusual period of price growth, she says.  She adds that Industry research indicates that buyers and sellers alike are putting their plans on hold and waiting for more stability to return to the market.

“At the start of Covid in 2020, the average price in Harrow was £474,000. It now stands at £631,000”

Tim Bannister, Rightmove’s Director of Property Science, agrees that many buyers are waiting before committing to a purchase. He believes that many are hoping fixed-rate mortgage deals may come down in the new year. As a result, the sense of urgency is disappearing from the market. Buyers feel they have the luxury of waiting for a home that better suits their needs rather than having to snap up something that is less ideal. He predicts homes will take longer to sell next year and will be on the market for a more normal period of time of around 60 days. Home repossessions aren’t expected to dramatically increase in 2023 and, as a result, the supply/demand balance should improve and stabilise prices. Looking ahead, Rightmove predicts an average fall of 2% in house prices in 2023 but add that there will be regional and sector variations within that average. 

The Halifax doesn’t put any figures on their predictions for next year, commenting that the housing market will be affected by many factors, including mortgage rates, general inflation and the labour market. Context is very important when it comes to forecasts of negative house price growth. For example, at the start of Covid in 2020, the average price in Harrow was £474,000. It now stands at £631,000, equivalent to a rise of 33.1 percent. Predicted single digit falls must therefore be seen in that context.