House prices down 1.4% in 2023: UK HPI

Despite the UK average drifting into negative territory over the year, both Scotland and Northern Ireland showed positive growth.

Related topics:  Housing,  House Prices,  UK HPI
Property | Reporter
14th February 2024
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"These figures are even more interesting this month, not just because they include mortgaged and cash transactions unlike others, but because they reflect activity when the market was experiencing seasonal and pre-mortgage rate reduction jitters"
- Jeremy Leaf

Average house prices across the UK decreased by 1.4% in the 12 months to December 2023, up slightly from a decrease of 2.3% in the 12 months to November, according to this morning's UK House Price Index from the Land Registry.

Provisional estimates show that the average UK house price was £285,000 in December 2023 - £4,000 lower than 12 months ago. In the 12 months to December 2023, average house prices decreased in England to £302,000 (by 2.1%), decreased in Wales to £214,000 (by 2.5%) and increased in Scotland to £190,000 (up by 3.3%). The average house price increased in the year to Q4 (Oct to Dec) 2023 to £178,000 in Northern Ireland (1.4%).

On a non-seasonally adjusted basis, average UK house prices increased by 0.1% between November 2023 and December 2023, compared with a decrease of 0.8% during the same period 12 months ago.

National and regional breakdown

Across England, annual house price inflation was highest in the North West, where prices increased by 1.2% in the 12 months to December 2023. London was the English region with the lowest annual inflation, where prices decreased by 4.8% in the 12 months to December 2023.

At the country level, the highest annual house price percentage change in the 12 months to December 2023 was recorded in Scotland, where house prices increased by 3.3%.

England saw average house prices decrease by 2.1% in the 12 months to December 2023.

Wales saw average house prices decrease by 2.5% in the 12 months to December 2023.

Northern Ireland saw average house prices increase by 1.4% over the 12 months to Quarter 4 (October to December) 2023.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “These figures are even more interesting this month, not just because they include mortgaged and cash transactions unlike others, but because they reflect activity when the market was experiencing seasonal and pre-mortgage rate reduction jitters.

“The resilience demonstrated at that time has continued since. Lower-than-expected and now stabilising inflation is improving prospects of further base rate cuts which will give buyers and sellers another boost."

Emma Cox, MD of Real Estate at Shawbrook, commented: “2023 ended with a downturn in property activity with challenging market conditions preventing buyers from making any major moves.

“2024 however is looking more positive with a reduction in mortgage rates fuelling activity at the start of the new year. Landlords should take note of the continuing trend among professional property investors in 2024, as they strategically diversify their portfolios to spread risk and shield themselves from challenging markets.

"This presents an opportune moment for professional investors to assess and review their portfolios and the potential benefits of diversification. We’re seeing a strong demand for commercial finance products.

“Despite market challenges, there remains an overall sense of optimism. The combination of falling mortgage interest rates and a buyers market is encouraging landlords to seize opportunities and expand their portfolios.”

Anna Clare Harper, CEO of sustainable investment adviser GreenResi, says: “In nominal terms (before inflation), house prices are down by 1.4% annually in the year to December 2023. This reflects a lag in sentiment, which is increasingly positive. The volume of talk of house prices having ‘hit the bottom of the market’ is getting louder.

"However, back in December, it’s easy to see why pricing was softer than a year before. Higher interest rates are meant to and do calm demand to buy things, including homes, down. They also have a disproportionate impact on affordability for homeowners and potential homeowners reliant on mortgages.

"Demand from mortgaged property owners fell, but 36% of homes are owned without mortgages. This is the largest part of the housing market and it acts as an anchor, keeping pricing stable when other investments get stormy. What’s more, the supply of homes is constrained. As a result, a significant house price crash remains very unlikely."

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “It’s a mixed bag for mortgage rates, with some lenders pricing downwards, as others edge rates upwards with little notice in order to balance service levels with increased demand for ‘best buy' products. There are bound to be ups and downs ahead as there is still plenty of volatility, with the latest inflation figures suggesting that it could be a little longer before the Bank of England feels confident enough to make that first-rate reduction.

"Swap rates, which underpin the pricing of fixed-rate mortgages, have been rising this past week and ticked up again today on the back of the inflation data, with five-year Swaps rising to 3.98 per cent compared with 3.84 per cent a week ago.

“Borrowers need to be mindful that if they like the look of a rate it might not be around for long so they should speak to a whole-of-market broker and take action. If rates have fallen again by the time they come to take out the mortgage, they should be able to switch to another, cheaper product at that time."

Richard Harrison, Head of Mortgages, Atom bank comments: “The news of a 1.4 % decrease in house prices in December will come as little surprise.

"A seasonal dip in asking prices is always expected in the lead-up to Christmas, and the final month of 2023 saw vendors becoming increasingly competitive, reducing their pricing in the hope of closing a sale before the New Year.

"Likewise, higher mortgage rates and stretched affordability for some buyers may have motivated them to offer below the asking price, in a bid to offset the impact of higher borrowing costs.

"More recent indicators point to increasing house prices as confidence in the market improves, and we should see this reflected in future ONS data. The festive period was in fact a turning point, with more than 10,000 new properties coming to the market on Boxing Day - the biggest number of new sellers in one day since 2011, according to Rightmove.

"This increased activity was also met by heightened demand, with new buyer enquiries at their strongest in almost two years in January, the latest figures from the Royal Institution of Chartered Surveyors (RICS) show.

"Brokers have hit the ground running this year and while we have seen no movement in the base rate, lender competition has ensured the average two-year fixed rate continues to edge closer to 5%.

"A surprise uptick in business can catch lenders off guard, leading to a slip in service, and we have already seen a number of lenders pulling some of their best-buy products to manage volume and protect service levels.

"With all the signs pointing to increased demand continuing, swift service will be key to delivering a good customer experience in 2024. Atom bank is committed to ensuring that speed and service remain our primary focuses as we head into what could be a busy year ahead.”

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