Are UK house prices 2023 going down? What Halifax House Price Index December 2022 figures show

Rising interest rates, high inflation and a probable recession are all putting the housing market under pressure in 2023, according to the mortgage lender

As the UK moves into 2023, all eyes are set to be on the housing market as the country’s economy heads for a recession.

With the cost of living crisis showing no signs of going away, how property prices change in light of rising interest rates and record high inflation is going to be weighing heavily on buyers and homeowners alike. The Bank of England raised its base rate by the single biggest amount since 1989 in November and increased it by another 0.5 percentage points to 3.5% in December.

It came after the short-lived Liz Truss government pushed the UK economy into precarious territory with a swathe of unfunded tax cuts. Rishi Sunak and Jeremy Hunt’s Autumn Statement appears to have steadied the ship to the extent that fears of a housing market crash appear to have subsided, with the government’s decision to retain the stamp duty cut likely to insulate houe prices from some of the economic pain.

House price rises were already slowing towards the end of 2022 - albeit after a year of record growth, particularly in commuter towns. A lengthy recession is only likely to depress the market further.

But what were house prices doing in the run up to Christmas - and what could happen in 2023? NationalWorld has looked at the latest HalifaxHouse Price Index (HPI) to find out.

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

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.

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

What does December Halifax HPI show?

Halifax revealed its HPI for the month of December 2022 on Friday (6 January).

It shows house prices decreased 1.5% compared to November (a slight improvement on the 2.4% drop recorded in November), while the annual rate of growth tumbled to 2% from 4.6%. It means the average UK property price is £281,272, almost £4,000 lower than the previous month’s average and more than £12,500 than 2022’s peak price of £293,992 recorded in August.

The biggest slowdown has been seen in the North East, where house prices are now growing 6.5% on annual basis having been 10.5% up in November. It means an average home in the region costs just under £170,000.

Similar falls were recorded in Eastern England (5.5% vs 7.2% - average price: £337,000), the West Midlands (7.3% vs 9.1% - average price: £251,000) and Wales (6.1% vs 7.7% - average price: £217,500). Overall, all UK nations and regions recorded monthly falls in house price inflation.

Greater London is continuing to experience the slowest rate of growth in the country, with prices 2.9% higher year-on-year as of December. But the capital still has the highest prices in the UK, with an average property costing more than £541,000.

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Homes in Scotland are now 3.5% more expensive than they were 12 months previously (having been 6.4% up in November), with average prices now coming in at just over £200,000. Meanwhile, in Northern Ireland the average property now weighs in 7.1% higher than a year ago at just under £184,000 (growth has slowed from 9.1%).

It comes despite a rise in the rate of house buying in November (the latest data period available), with HMRC data for completed transactions (i.e. home buying processes that are likely to have been started months earlier) showing purchasing sped up 0.2% month-on-month and was 4.3% higher than a year previously. However, Bank of England mortgage approval figures for the same month showed a market slowdown is in the offing, as mortgage approvals decreased by more than a fifth (20.4%) compared to October, and were a third (33.2%) lower than November 2021.

Are house prices going down in 2023?

Halifax says the market is slowing overall, as a result of the “uncertainties” surrounding the cost of living and interest rates. After a “mixed” 2022, the lender forecasts that house prices are set for a marked fall over the next 12 months.

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

“As we enter 2023, the housing market will continue to be impacted by the wider economic environment and, as buyers and sellers remain cautious, we expect there will be a reduction in both supply and demand overall, with house prices forecast to fall around 8% over the course of the year,” said Kim Kinnaird, director of Halifax Mortgages.

“It’s important to recognise that a drop of 8% would mean the cost of the average property returning to April 2021 prices, which still remains significantly above pre-pandemic levels.”

Ms Kinnaird added that house prices were 11% higher at the start of 2022 than they were at the beginning of 2021, and that they grew another 6% (£17,000) in the first half of last year.

Halifax’s forecast for the year ahead is broadly in line with that of independent public body the Office for Budget Responsibility (OBR), which has predicted a 9% drop in average prices by 2024. But the Rightmove HPI believes the downturn could be much softer at 2% due to “multi-speed hyper-local market” movements (i.e. rocketing prices in particular towns, or even specific streets, compared to falling prices in nearby areas).