Housing Market Slumps - but Worse Is Yet to Come

House prices are still showing unreal, almost double-digit rises as they catch up with the recent economic shocks.

Although the stranglehold of higher interest rates and the increasing cost of living is gripping the thoughts of buyers and sellers, statisticians and economists are still basking in the heady days before Liz Truss went through the Downing Street revolving door.

The official house price index from the Office for National Statistics (ONS) is still churning data from September 2022.

Then, house prices had risen 9.5 per cent in the previous 12 months, leading the ONS report to remark that house price growth was slowing to leave the average UK home valued at £295,000 - A whopping £26,000 more than a year earlier and the highest figure ever recorded.

The fear across the market is house prices will fall, making homeowners and landlords seem poorer.

But even a 10 per cent fall on the current growth rate leaves prices roughly where they were a year ago - rising at around seven per cent a year with the average home worth £271,000.

The point is the bottom is unlikely to fall out of the market, but a loss is inevitable and only sets the clock back a year or so.

UK house prices since January 2006

How have house prices changed since the last financial crisis

Source: ONS

How have house prices changed near you

Regionally, ONS data shows the South West has posted the highest house price growth, with a rise of 11.9 per cent. The East Midlands was not far behind, with an increase of 11.6 per cent.

The North East showed the most nominal price growth - with just a 5.6 per cent rise.

London was the second worst region for price growth, with an increase of 6.9 per cent.

Source: ONS

House price history for your neighbourhood

Use this interactive map to assess how your property investments have performed. Input the town name, and the map does the rest.

Source: ONS and Land Registry

House prices dipping

The Halifax, one of Britain's biggest mortgage lenders, reports prices dipped by 0.4 per cent between September and October but still returned 8.3 per cent growth year-on-year.

Halifax Mortgages director Kim Kinnaird said: “Average house prices fell in October, the third such decrease in the past four months. The drop of 0.4 per cent is the sharpest we have seen since February 2021. While the pace of annual growth also continued to ease, to 8.3 per cent compared to 9.8 per cent in September, average prices remain near record highs.

“Though the recent period of rapid house price inflation may be ending, it’s important to keep this in context, with average property prices rising more than £22,000 in the past 12 months, and by almost £60,000 (+25.7%) over the last three years.”

The most significant drop in 30 months

Another country's largest mortgage lender, The Nationwide, echoed the Halifax report but doubled down on the figures.

The building society shows house prices dropping 1.4 per cent month-on-month in October but up 4.4 per cent in the year - the most significant fall quoted by the lender since June 2020.

Chief economist Robert Gardner said: “The fallout from the [Kwarteng] mini-Budget continues to impact the market, with November seeing a sharp slowdown in annual house price growth

“The market looks set to remain subdued in the coming quarters. Inflation is set to remain high for some time and bank rate is likely to rise further as the Bank of England seeks to ensure demand in the economy slows to relieve domestic price pressures.

“The outlook [for the housing market] is uncertain, and much will depend on how the broader economy performs.”

House price digest FAQ

The figures for average house prices and movements in property values can be confusing if you don't know how to read the data.

Here are some of the most asked questions about house price indices.

Why are the average property prices different in each report?

The reports use different data to draw conclusions and take the data from different periods.

Nationwide and Halifax base their indices on customer data, which are much smaller samples than the national data analysed by the ONS.

Acadata's methodology includes analysis that no other index uses.

Each organisation collects data over different periods, making a direct comparison difficult.

What is the average house price?

There's no such thing as an average home. The figure is calculated from the total value of all transactions in the sample divided by the number of homes changing hands.

What are the asking and sale prices?

The asking price is the amount an owner would like to achieve from a house sale, while the sale price is the negotiated amount paid by the buyer.

Which house price index is the best?

All have flaws because of the restricted data, but the one with the broadest sample comes from the ONS. Unfortunately, the ONS data is usually the last to market and out of date by two to three months on publication.