Are House Prices Coming Down – And What Does That Mean For Buyers And Sellers?

Amid the cost of living crisis and the rather delicate economy right now (which seems to have flatlined), it’s hard to know what to do if you’re looking to buy or sell your home.

Average house prices are technically down compared to six months ago, but still up compared to this time in 2022 – and much higher than pre-pandemic levels.

So, here’s a look at what we know so far about the housing market.

Are house prices down?

Well, it’s complicated. Annual house price growth remained at 2.1% for the third month in a row in February this year, according to Halifax.

The average UK house price in February was £285,476, said the bank.

That’s a fall compared to the Office for National Statistics (ONS) index, which claimed the average UK house price was £294,000 in December and £295,000 in November 2022.

Average UK house price
Average UK house price

Average UK house price

But, property values increased by 1.1% in February from the month before. Whereas between December 2022 and January 2023, there was a 0.2% rise.

Kim Kinnaird from Halifax Mortgages also explained that house prices in general are down around £8,500 (2.9%) compared to August last year, when they peaked.

However, they still remain almost £9,000 higher than the average prices seen at the start of 2022 – and are still above pre-pandemic levels.

How does this vary according to region?

This is how much the average house in each UK region costs, according to Halifax – along with how much it has changed annually:

– East Midlands, £234,749 (increase of 2.4%)

– Eastern England, £331,442 (increase of 1.4%)

– London, £526,842 (decrease of 0.9%)

– North East, £163,953 (increase of 1.1%)

– North West, £221,306 (increase of 3.7%)

– Northern Ireland, £185,009 (increase of 5.7%)

– Scotland, £198,779 (increase of 2.2%)

– South East, £387,205 (increase of 1.7%)

– South West, £298,939 (increase of 1.4%)

– Wales, £210,917 (increase of 1.2%)

– West Midlands, £246,351(increase of 5.0%)

– Yorkshire and Humber, £200,634 (increase of 3.6%)

It looks like London is the only area where there’s been a substantial decrease. According to Halifax, that may be because of the capital’s large proportion of flats.

What does this mean for buyers and mortgages?

Mortgage rates suddenly soared last autumn after Liz Truss unveiled her mini-budget in September. This prevented some buyers from purchasing, because the cost of borrowing increased dramatically through hiked interest rates, but this appears to finally be settling down.

The Bank of England did recently increase the bank rate of interest to 4%, but this is not expected to get too much steeper in the upcoming months now that inflation is no longer soaring.

As Tom Bill, from estate agent Knight Frank, told PA: “The UK housing market appears near the end of a long hangover from the mini-budget rather than on the verge of a price plunge.

“Activity stopped well before Christmas due to the mortgage market turmoil but has picked up this year as people come to terms with where rates are settling.”

Kinnaird also told PA: “Recent reductions in mortgage rates, improving consumer confidence, and a continuing resilience in the labour market are arguably helping to stabilise prices following the falls seen in November and December.”

She also suggested: “With the cost of a home down on a quarterly basis (by 2.5%), the underlying activity continues to indicate a general downward trend.”

Meanwhile, Mark Harris, chief executive of mortgage broker SPF Private Clients, said lenders continue to “jockey for position”, with a number of them increasing the pricing of their cheapest five-year fixes.

“However, even if there is another base rate rise this month, there is a growing expectation that rates are close to their peak, and if inflation also continues to fall, the outlook appears brighter for borrowers,” he said.

What does this mean for sellers?

Halifax thinks most sellers will be able to retain the price gains made during the pandemic as the average house price remains high.

Experts think current house prices are looking sluggish compared to the meteoric rates seen earlier in the pandemic market boom, but at least it is more stable compared to a few months ago.

There’s also been a change in attitude from buyers, according to Nathan Emerson, from the estate agents’ body Propertymark.

He told PA: “Year on year, estate agents across the UK have seen a small drop in the number of sales being agreed whilst the number of new properties coming to market has remained the same.

“Increases to interest rates have caused buyers to rethink their budget and haggle on price, but the drive evidently still remains to see their purchase through and move home.”