Halifax records shock rise in house prices for 2023 - were values really up?

House prices ended 2023 up 1.7%, Halifax has claimed.

The lender’s latest House Price Index for December 2023 suggests the price of a typical home ended the year at £287,105.

This was also up 1.1% on a monthly basis, the third consecutive rise.

The figures come despite Halifax and others predicting house price falls for the year. It also contradicts the Nationwide House Price Index, which registered an annual decline for 2023, while other indices such as Rightmove asking price data have suggested a dip.

The rise may be more down to the level of mortgage lending being performed by Halifax, while the lender also adds that prices are being driven by a lack of supply rather than increased demand.

It is still expecting a 2% to 4% drop in average house prices this year.

Kim Kinnaird, director, Halifax Mortgages, said: “Whilst it’s encouraging that we saw growth in the last three months of the year, this was preceded with property price falls for six consecutive months between April and September.“The growth we have seen is likely being driven by a shortage of properties on the market, rather than the strength of buyer demand.

"That said, with mortgage rates continuing to ease, we may see an increase in confidence from buyers over the coming months.”

Across all the UK regions, Northern Ireland recorded the strongest house price growth in 2023, as properties increased by 4.1% to £192,153. Scotland saw property prices increase by 2.6% to £205,170. At the other end of the scale, the South East fell most sharply, houses there now average £376,804, down 4.5%.

Kinnaird added: “As we move through 2024, the UK property market will continue to reflect the wider economic uncertainty and buyers and sellers are likely to be naturally cautious when considering making a move. While wage growth is now above inflation, helping to ease cost of living pressures for some and improving housing affordability, interest rates are likely to remain elevated for as long as inflation remains markedly above the Bank of England’s target.

“Our latest forecast suggests house prices could fall between -2% and -4% during the coming year, although, as with recent years, forecast uncertainty remains high given the current economic climate.”
 
Commenting on the data, Tom Bill, head of UK residential research at Knight Frank, said: “Annual house price growth has returned to positive territory as the economic convulsions of the last 18 months dissipate. 

“The landscape changed at the end of last year as inflation dropped below 4%, which has put marked downwards pressure on mortgage rates and means housing transactions will keep rising from a low base. There is likely to be a seasonal bounce in activity this spring, particularly after the Prime Minister hinted this week that the election will happen in the second half of 2024.”

Iain McKenzie, chief executive of The Guild of Property Professionals, added: “A rise in house prices in December is a clear indication that the market is starting to recover after a year of downward pressure.

“While other measurements suggest an annual fall in house prices, Halifax is reporting growth of nearly 2%, which will bring a sigh of relief to sellers worried that their home would lose significant value in 2023.

“The South East has been the worst affected by sluggish market activity, but it’s always worth bearing in mind that prices in this part of the country have been inflated for some time, becoming increasingly unaffordable for first-time buyers without financial support. 

“Affordability will likely remain an obstacle for first-time buyers as we move through 2024, but mortgage availability will hopefully improve as the Bank of England eventually looks to lower interest rates.

“Property sales show a 22% decline, which reflects this lack of mortgage competition. However, the demand for quality housing is propping this figure up, with high rent rates pushing more people to want to buy.”