Halifax UK house prices: what do housing market figures for May 2023 show? Average sold prices explained

Annual house prices have fallen for the first time in more than a decade, new figures show.

Halifax’s latest house price index data for May 2023 shows the average house price has fallen by 1% across the UK. It is the first time these housing market figures have experienced an annual decline since December 2012 when a 0.1% fall was recorded.

The average UK house price slipped slightly from £286,662 in April 2023 to £286,532. It follows continued ‘volatility’ in the economy and the latest sign of uncertainty in the housing market in the wake of Liz Truss’s mini budget. The wider cost of living crisis also appears to be weighing on homebuyers’ ability to afford a deposit and current mortgage rates.

Near-record inflation and high interest rates have reduced the spending power of everyone, although separate Halifax research has shown that some UK seaside towns have apparently remained immune to any downturn. Generally, the cost of a typical home remains close to the record highs recorded in 2022.

Halifax’s data comes after fellow mortgage lender Nationwide recorded the biggest downturn in prices since 2009 in its own HPI. Other analyses by Zoopla and Rightmove have shown sellers appear to be accepting greater discounts on their initial asking prices in a bid to attract buyers. Meanwhile, official statistics show any downturn in prices has been much less pronounced at the completion stage of purchasing a property.

So, what does Halifax’s latest HPI for May 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 May 2023 Halifax House Price Index show?

Halifax’s May 2023 HPI shows house prices remained consistent with April's figures, with the average house price now recorded at £286,532 compared to £286,662 in April.

While the average home is coming in at almost exactly £7,000 (2.4%) below the all-time peak of £293,992 recorded in August 2022, it is well above a low of £281,713 recorded in December. Liz Truss’s mini budget was largely responsible for monthly falls of 2.4% and 1.3% in November and December.

To put the latest figure into a longer-term context, average prices are around £10,000 above where they were at the start of 2022. It means recent declines have not come close to wiping out the gains the housing market made during Covid-19.

According to Kim Kinnaird, director of Halifax Mortgages, the annual decline "largely reflects a comparison with strong house prices this time last year, as the market continued to be buoyant heading into the summer".

“Property prices have now fallen by about £3,000 over the last 12 months and are down around £7,500 from the peak in August," said Ms Kinnaird. “But prices are still £5,000 up since the end of last year, and £25,000 above the level of two years ago.

“As expected, the brief upturn we saw in the housing market in the first quarter of this year has faded, with the impact of higher interest rates gradually feeding through to household budgets, and in particular those with fixed-rate mortgage deals coming to an end.

“With consumer price inflation remaining stubbornly high, markets are pricing in several more rate rises that would take (the Bank of England) base rate above 5% for the first time since the start of 2008. Those expectations have led fixed mortgage rates to start rising again across the market.

“This will inevitably impact confidence in the housing market as both buyers and sellers adjust their expectations, and latest industry figures for both mortgage approvals and completed transactions show demand is cooling. Therefore further downward pressure on house prices is still expected.”

Her comments come after HMRC data showed the number of UK property sales increased 1.3% month-on-month to 89,560 in March 2023. On a quarterly basis, sales are 10.2% down on the volumes being seen between October and December last year and 18.9% below the level of activity being seen in the first quarter of 2022.

What’s happening to house prices in the UK nations and regions?

House prices across the UK have been edging lower compared to last year over recent months. In part, this is because of 2022’s record prices and rapid growth, which the housing market would have struggled to match even without Liz Truss’s Mini Budget.

Several UK nations and regions now have lower prices than they did in the three months to May 2022. The South East is leading the descent, with prices now 1.6% down on last year’s comparable figures. Eastern Midlands (-1.0%), Greater London (-1.2%) and the South West (-1.4%) have also recorded declines. Halifax says this reflects the impact of higher mortgage costs, given these areas tend to be the most expensive in the country.

At the other end of the scale, the West Midlands (+2.7%), Yorkshire and Humber (+2.3%) continue to see prices climb. However, their average prices are still well below those of London and the South East. Northern Ireland (+1.6%), Scotland (+1.3%) and Wales (+1.1%) are also continuing to register increases.