House prices drop as mini-Budget 'continues to hit the market'

Average house prices fell for the fifth month in a row during December, Halifax has revealed, as it warns of more dips for the market.

The lender’s latest House Price Index showed average property values fell by 1.5% in December 2022 and annual growth slowed from 4.6% in November to 2% in December.

The rate of annual growth slowed in all nations and regions during December and is a long way from the 9.7% price inflation recorded at the beginning of the year.
House prices ended 2022 at £281,272 on average.

It comes as the Halifax House Price Index markets its 40-year anniversary, with house prices up 974% since early 1983.

Kim Kinnaird, director at Halifax Mortgages, said: “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.”

Commenting on the data, Tom Bill, head of UK residential research at Knight Frank, said: “The first rule for anyone predicting the trajectory of house prices in 2023 should be to ignore any data from the chaotic final quarter of 2022. 

“The latest data shows two things are happening at the same time.

“First, the effect of the mini-Budget is working its way through the system, which means that monthly declines are narrowing. 

“At the same time, an annual fall in house prices appears imminent, underlining how the lending landscape has changed irrespective of the mini-Budget. As rates normalise, buyers will increasingly recalculate their financial position and house prices will come under pressure. We expect a 10% decline over the next two years, taking them back to where they were in mid-2021.”