Are UK house prices going down? Halifax House Price Index explained - what latest August figures show

With the cost of living crisis and concerns mounting that the UK will fall into a recession, the property market could face a slowdown, Halifax has warned

With the cost of living crisis and forecasts of a UK recession, questions have begun to swirl around whether UK house prices could crash.

While property prices have risen steeply since the Covid-19 pandemic, Rightmove’s House Price Index (HPI) published in mid-August found they had fallen back slightly (although this was described as normal for the time of year).

While the housing market remains strong, a slowdown could be on its way according to Halifax (image: Getty Images)

Now, high street bank brand Halifax has released the latest version of its own highly respected HPI.

So what does this house price index show - and are prices going down?

Here’s everything you need to know.

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.

Halifax’s HPI does not necessarily track completed house purchases (image: Adobe)

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 August Halifax HPI show?

On 7 September, Halifax revealed its HPI for the month of August 2022.

The headline figure was that house prices increased 0.4% in August compared to July (when they fell back marginally by 0.1%).

(source: Halifax/IHS Market)

Given the average rate of monthly house price inflation has been 0.9% over the past 12 months, this suggests the market has slowed down over the summer months.

On an annual and quarterly basis, there was a slowdown in property price growth.

Prices were 11.5% higher than in August 2021, but in July they were 11.8% up.

But this still means the average price has reached a record high of £294,260.

Wales saw the biggest amount of house price inflation, with prices jumping 16.1% year-on-year - the highest rate of inflation since 2005.

It means prices in the nation have gone up by £31,246 to £224,858 on average.

Scotland’s annual inflation rate slowed from 9.5% to 9.4%.

Meanwhile, in London, prices went up 8.8% (£44,669) - the strongest growth recorded in the capital since 2016.

Halifax says the average property there now costs £554,718.

Are house prices going down?

In short, house prices are not going down yet but could well do in the coming months - albeit from record highs.

Kim Kinnaird, director of Halifax Mortgages, said that despite the apparent resilience of the housing market, there were “cooling expectations” across the sector.

“Firstly, there is the considerable hit to people’s incomes from the cost-of-living squeeze. The 80% rise in the energy price cap for October will put more pressure on household finances, as will the further increases expected for January and April,” she said.

With the cost of living crisis and high interest rates, consumers may be put off making a house purchase (image: AFP/Getty Images)

“At the levels being predicted, this is likely to constrain the amounts that prospective homebuyers can afford to borrow, on top of the adverse impact of higher energy prices on the wider economy.”

“While government policy intervention may counter some of these impacts, borrowing costs are also likely to continue to rise, as the Bank of England is widely expected to continue raising interest rates into next year.”

She added: “With house price to income affordability ratios already historically high, a more challenging period for house prices should be expected.

“However, this should be viewed in the context of the exceptional growth witnessed in recent years, with average house prices having increased by more than £30,000 over the last 12 months alone.”