Written by Kim Kinnaird, Director, Halifax Mortgages
In December, the cost of the average UK home was £281,272, a fall on the previous month of -1.5%, with annual growth slowing to +2% (from +4.6%). However, the fall in December was lower than the monthly decline of -2.4% recorded in November, even taking into account seasonal slowdown driven by the festive period.
As we’ve seen over the past few months, uncertainties about the extent to which cost of living increases will impact household bills, alongside rising interest rates, is leading to an overall slowing of the market.
The housing market was a mixed picture in 2022. We saw rapid house price growth during the first six months, followed by a plateau in the summer before prices began to fall from September, as the impact of cost of living pressures, coupled with a rising rates environment, began to take effect on household finances and demand.
These trends need to be viewed in the context of historic prices. The cost of the average home remains high – greater than it was at the start of 2022 and over 11% more than house prices at the beginning of 2021. The first half of last year was a very strong period for sellers, between January 2022 and August 2022, the average cost of a home rose by over £17,000 to £293,992 (growth of +6%), setting a new record high.
As we enter 2023, the housing market will continue to be impacted by the wider economic environment and, as buyers and sellers remain cautious, we expect there will be a reduction in both supply and demand overall, with house prices forecast to fall around -8% over the course of the year. It’s important to recognise that a drop of 8% would mean the cost of the average property returning to April 2021 prices, which still remains significantly above pre-pandemic levels.
Nations and regions house prices
All nations and regions saw annual house price inflation, although the rate of growth has slowed.
On an annual basis, the North East saw the greatest slowdown in growth, with annual house prices rising by +6.5%, compared to +10.5% the prior month. Average house prices in the region are now £169,980.
Eastern England, West Midlands and Wales experienced the smallest falls in growth rate. Those buying in the East of England will now pay an average £337,215 (growth rate +5.5% vs +7.2% in November), while in the West Midlands average properties now cost £250,965 (growth rate +7.3% vs +9.1% in November). The average home in Wales is now £217,547, with annual growth now +6.1% (down from +7.7% the prior month)
Those buying in Scotland will find an average home now costs £200,166, with the second greatest slowdown in the annual growth in the UK, now +3.5% (from +6.4% last month).
Properties in Northern Ireland are up +7.1% year-on-year, lower than the +9.1% last month, with average homes now costing £183,825.
The cost of an average home in London in December was £541,239, a growth of +2.9% annually, compared to +5.0% last month.
Halifax House Price Index turns 40
The Halifax House Price Index was established in January 1983, when the average UK house price was £26,188 and Bank Base Rate was 11%*. Since then, average house prices have grown +974% to £281,272 and Bank Base Rate sits at 3.5%.
While the cost of buying a home was at its lowest when the Index began, looking over the past four decades, prices peaked in August 2022 at £293,992.
Regionally, London was the most expensive place to buy a home in early 1983, as it is today. Properties in the capital were an average £36,056 in the first three months of that year, compared to £541,239 today. Yorkshire and the Humber was the cheapest place to buy a property when the Index began (£20,332 vs £205,466 now), whereas the properties with the lowest average cost can now be found in the North East (£169,980 vs £21,494 in Q1 1983).
In Scotland, the average property in the first quarter of 1983 was £26,411 vs £200,166 today. In Wales, the average home now costs £217,547, compared to £21,388 forty years ago. For Northern Ireland, those buying in the first three months of 1983 needed £23,383 on average, today it is £183,825.