House prices have remained flat for a second consecutive month following months of major falls since the mini budget, new data from the Halifax House Price Index (HPI) has shown.
When Liz Truss and Kwasi Kwarteng’s September 2022 fiscal package led interest rates to skyrocket, as markets feared their unfunded tax cuts would make inflation worse, house prices across the UK suffered due to the soaring cost of mortgages. The cost of living crisis more generally has also meant people have been unable to spend money on anything but the essentials - although even this has proven difficult for some, according to new research by Which?.
But while these issues have not gone away, inflation appears to be coming down and is forecast to continue to do so over the course of the year. At the same time, there have been some indications from the Bank of England that its base rate rise in February could be its last. Inflation remains close to record highs at 10.1%, and could go higher from April when key household bills, including council tax as well as those for mobile and broadband packages, are set to rise. Energy bills are also earmarked for a hike, but there is a growing chance the government could scrap this rise.
The pressure on household budgets has led several housing market experts to predict 2023 will see house price growth fall into negative territory for the first time since the first UK lockdown in 2020. Indeed, mortgage lender Nationwide has already seen this occur in its figures. But government data shows house prices at the completion stage continued to increase well after the mini budget - albeit thanks to deals that are likely to have been struck some time before the mini budget.
So, what does Halifax’s latest HPI for February 2023 show us - and what does the bank think will happen to the property ladder this year?
What is the Halifax HPI?
The Halifax HPI is a property price index that has been analysing UK house prices on a monthly basis since January 1983. It measures the market by looking at mortgage offers.
The bank is responsible for 15% to 20% of the UK mortgage market. It means the Halifax HPI is a good measure of house prices as they appear later on in the buying process - although it doesn’t necessarily mean the deals tracked have gone on to be completed.
Some indices - like Rightmove’s - look at asking price data, which tends to reflect seller sentiments as they currently are but does not show how far above or below the asking price the properties are actually sold for.
Others analyse land registry data, which reveals the actual price the property sold for and accurately tracks how much activity there has been in the property market, but tends to be less up-to-date.
What does February 2023 Halifax House Price Index show?
Halifax revealed its HPI for the month of February 2023 on Tuesday (7 March). It shows house prices grew marginally, with the average price rising more than £3,000 on January’s figure to £285,476. Property values are now 2.1% up against a year ago, according to the lender.
It means property prices remained relatively stable month-on-month, after several hefty monthly falls in the wake of Liz Truss’s September mini budget. The housing market saw drops of 2.4% in November and 1.3% in December.
Despite a slight rebound last month, they are still £8,500 below the peak of £293,992 recorded in August 2022. Halifax Mortgages director Kim Kinnaird said the relative stability being seen was the result of several factors.
“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 said. “Still, with the cost of a home down on a quarterly basis, the underlying activity continues to indicate a general downward trend.
“In cash terms, house prices are down around £8,500 (-2.9%) on the August 2022 peak but remain almost £9,000 above the average prices seen at the start of 2022 and are still above pre-pandemic levels, meaning most sellers will retain price gains made during the pandemic. With average house prices remaining high, housing affordability will continue to feel challenging for many buyers.”
While the UK-wide story is one of stability, it changes somewhat when you split the UK into its respective nations and regions. Greater London is now in negative territory year-on-year, having seen prices fall 0.9% (£4,000) - although a typical property in the capital will still set you back £240,000 more than the UK average price (£526,842).
All the other nations and regions remain in annual growth, albeit after experiencing monthly drops in price. Wales has seen annual growth tumble to 1.2% from the 6% recorded in December, with the average house price now sitting at £210,917 (down from a peak of £224,210 in August). It is a similar story in the South West of England, where the rate of yearly growth has tumbled to 1.4% from the 6% seen at the end of 2022. It means the average home will set you back around £298,939.
The largest annual fall recorded by Halifax between January and February was in the North East, where average prices remained 1.1% above last year having been 3.6% up in January. Homes there now typically cost £163,953.
Meanwhile, the slowdown has been less pronounced in Northern Ireland and the West Midlands, where annual growth remains at 5.7% and 5% respectively. Homes over the Irish Sea now cost an average of £185,009, while those in and around Birmingham will set you back £246,351.
It all comes against a backdrop of falling mortgage approval figures and tumbling property transaction numbers. Bank of England data for January 2023 shows the number of mortgages granted to finance domestic property purchases was 46% below where it was a year previously.
Meanwhile, HMRC monthly data shows property sales declined 2.6% between December and January. It means they are 4% down against the previous quarter and 10.6% lower year-on-year.
Are house prices going down in 2023?
Halifax has previously said it envisages a slowdown in prices over the course of the next 12 months. Kim Kinnaird said in February: “We expected that the squeeze on household incomes from the rising cost of living and higher interest rates would lead to a slower housing market, particularly compared to the rapid growth of recent years. As we move through 2023, that trend is likely to continue as higher borrowing costs lead to reduced demand.
“For those looking to get on or up the housing ladder, confidence may improve beyond the near-term. Lower house prices and the potential for interest rates to peak below the level being anticipated last year should lead to an improvement in home buying affordability over time.”
Halifax has previously predicted average prices will fall 8% throughout the course of 2023. However, while this fall may sound alarming, prices were still 20.4% (£48,620) above where they were three years ago by December 2022, with the previous three-year period (2017 to 2019) seeing a 7.8% rise, according to the lender.
The biggest increase has been seen in detached homes, where prices have leapt almost 26% (£93,345). Despite the Covid rush for space, flats have gone up £19,028 (13.3%) on average over this period.