Understanding the UK Housing Market: 2023 Outlook
House prices, as well as inflation and mortgage rates, are still rising, according to the latest data.
Asking prices have reached record highs - especially for first-time buyers - says online property portal Rightmove.
The latest survey by the Office for National Statistics (ONS) points out house prices rose 5.5 per cent in the year to February 2023 despite the cash squeeze for households sparked by soaring energy costs and mortgage rates rising again.
But the signs are that all three are slowing.
House prices added 6.5 per cent in the year to January but dropped an entire percentage point in February, while inflation dipped to 10.1 per cent.
Values fall for the third month in a row.
The Bank of England raised the base rate by 0.25 to 4.25 per cent and is expected to hike the bar again in May.
The house price fall was the third in consecutive months to an average of £288,000 - £16,000 more than a year ago but £5,000 less than the house price peak hit in November,
House prices grew the most in the West Midlands, up 8.6 per cent in the year to February. The lowest increase of 2.9 per cent was in London.
"Annual percentage changes in house prices were volatile in 2021 and 2022 because of price volatility in 2021 affecting annual rates of change. For example, the October 2022 annual percentage change was high, partly caused by a sharp fall in UK average house prices in October 2021, following Stamp Duty Land Tax changes," said the ONS.
The Rightmove survey explains sellers temper their expectations by putting their homes on the market at lower prices - 0.2 per cent lower than the seasonal 1.2 per cent hikes usually seen at this time of year.
Property sales drop by a fifth
The estate agent also points out that the number of completed property sales has dropped by a fifth since September, mainly due to the aftershock of then Chancellor Kwarsi Kwarteng's mini-Budget in the stormy period of the government of Prime Minister Liz Truss.
"Agents are reporting that many sellers have transitioned out of the frenzied multi-bid market mindset of recent years and understand the new need to tempt Spring buyers with a competitive price," said Director of property science Tim Bannister.
"The current unexpectedly stable conditions may tempt more sellers to enter the market who had been considering a move in the last few years but had been put off by its frenetic pace. Buyers may have struggled to find a home that suited their needs in the stock-constrained market of recent years and will now see more choices.
"Those who have decided to move should not wait too long, as not only is the number of sales agreed back to pre-pandemic levels, but homes are selling twelve days quicker than in 2019."
Lenders echo house price data.
Britain's biggest mortgage lenders, Halifax and Nationwide, agree with the ONS claim that house price rises are slowing.
The Halifax house price report shows prices have increased by a modest 1.6 per cent in the year to March, a monthly change of 0.8 per cent, taking the average house price to £287,880.
The Nationwide data is more severe, posting a price drop of -3.1 per cent in the year to March and a -0.8 per cent fall month-to-month.
Robert Gardner, Nationwide's Chief Economist, said: "March saw a further decline in annual house price growth, with prices down 3.1 per cent compared with last year. March also saw a further monthly price fall -- the seventh in a row -- which leaves prices 4.6 per cent below their August peak.
"The housing market reached a turning point last year due to the financial market turbulence which followed the mini-Budget. Since then, activity has remained subdued -- the number of mortgages approved for house purchase remained weak at 43,500 cases in February, almost 40 per cent below the level prevailing a year ago."
House purchase mortgage approvals ('000s)
Source: Trading Economics
How house prices have changed where you are
House price digest FAQ
The figures for average house prices and movements in property values can be confusing if you need to learn 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 wants to achieve from a house sale, while the sale price is the negotiated amount the buyer pays.
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.
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