“A tale of two halves for the UK housing market in 2022”

The UK housing market remained buoyant in the first half of 2022, but house prices flattened off from mid-year and fell near the end of the year.

“It was a tale of two halves for the UK housing market in 2022,” Andrew Asaam, homes director at Halifax, said as the bank released its review of the housing market and outlook for 2023.

“The year kicked off with average house prices continuing to rise at pace, still supported by low interest rates and strong demand from buyers. This meant the typical property had added more than £17,500 to its value by June.

“Following such rapid house price growth, and the growing economic headwinds, a slowdown was almost inevitable. We saw this play out with a flattening of house prices over the summer, before the 2.3% decrease recorded in November.”

Halifax said this downward trend will continue into 2023, with house prices expected to fall next year by around 8%. However, forecast uncertainty remains high given the current economic environment.

“Looking ahead to next year, it will clearly be a more challenging economic environment and the housing market will continue to rebalance to reflect these new norms,” Asaam pointed out. “Though the limited supply of properties for sale will continue to support prices, the pandemic-driven surge in demand has receded, and we’re emerging out of more than a decade of record low interest rates.

“We therefore expect that UK house prices will decrease by around 8% next year. To put this into perspective, such a fall would place the average property price back at roughly the level it was in April 2021, reversing only some of the gains made during the pandemic.

“There is still uncertainty around this forecast, with the trajectory for base rate – now expected to peak at 4% – and unemployment levels key to determining any future changes.”

The average UK house price is now £285,579 compared to £272,778 a year ago, a rise of £12,801. Annual house price growth is 4.7%, having peaked at 12.5% in June this year, which was the strongest rate of annual growth since January 2005.

A new record high average property price was set in August this year at £293,992. While today’s average property prices have fallen since, it is still £46,403, or 19.4%, higher than at the onset of the pandemic, and the current price of a typical UK house has increased by 71%, or an equivalent of £166,627, over the last decade.

The North East of England saw the highest rate of annual property price inflation of any UK region or nation in the 12 months to the end of November 2022 at 10.5%, while London recorded the slowest rate of annual house price growth at 5.2% over the last year. Still, the capital has, by far, the most expensive average UK property price at £549,160. The South East of England recorded the largest price increase over the year, up by £28,068.