"This month's fall reflects the worst of the market volatility over recent months"
The average UK house price was £285,579 in November, falling 2.3% from £292,406 in the previous month – the largest drop seen since October 2008 and the third consecutive monthly price fall, according to Halifax.
Its latest house price index also showed annual price growth slowing further to 4.7% from 8.2%.
The slowing market is reflected across the UK, with most nations and regions seeing the rate of annual house price inflation fall last month.
“While a market slowdown was expected given the known economic headwinds – and following such extensive house price inflation over the last few years – this month’s fall reflects the worst of the market volatility over recent months,” Kim Kinnaird, director at Halifax Mortgages, commented.
“Some potential home moves have been paused as homebuyers feel increased pressure on affordability and industry data continues to suggest that many buyers and sellers are taking stock while the market continues to stabilise.
Kinnaird, however, pointed out that when thinking about the future for house prices, it is important to remember the context of the last few years, when some of the biggest house price increases were recorded.
“Property prices are up more than £12,000 compared to this time last year, and well above pre-pandemic levels,” she said. “The market may now be going through a process of normalisation.
“While some important factors like the limited supply of properties for sale will remain, the trajectory of mortgage rates, the robustness of household finances in the face of the rising costs of living, and how the economy – and more specifically the labour market – performs will be key in determining house prices changes in 2023.”
In the meantime, scepticism among buyers looks set to continue, according to Emma Cox, managing director of real estate at Shawbrook Bank.
“The combined effects of double-digit inflation, alongside the UK’s slow march into recession is keeping many would-be first-time buyers away from entering the market,” she said. “With prices looking set to fall even further from the record levels experienced in the summer, and the effect of the mini budget still being felt, we expect to see professional landlords and real estate investors capitalising on the availability of cheaper stock to expand their buy-to-let portfolios.”
Steven Morris, director at Bristol-based mortgage broker Advantage Financial Solutions, agreed that the trend of prices heading down will continue throughout 2023.
“However, I would be surprised if average values dropped by more than 15% given that inflation is forecast to normalise by 2024,” Morris said. “A fall in prices greater than 15% within a period of 12 months seems historically unfathomable. Currently, many would-be buyers are waiting until 2023 for a bargain.”
Also commenting on the latest Halifax House Price Index, Jonathan Hopper, chief executive at real estate consultancy Garrington Property Finders, remarked that the speed with which the market has turned has left many people playing catch-up.
“Plenty of sellers still seem to think it’s 2021, not realising that to buyers it feels more like 2008,” he said. “The post-pandemic days of soaring prices and the ‘race for space’ as professionals snapped up homes in the middle of nowhere are over.”