House Price Index - December 2022
The dynamics that have shaped the housing market over the past five years are undergoing a shift.
In 2023, we expect affordable urban centers to perform better than the average, while the inner London market may require another year before it can rebound.
The significant decline in housing demand since the summer has quickly reversed the upward momentum in house prices. On a year-on-year basis, average prices have increased by 7.2%, equating to a rise of £17,500. However, the quarterly rate of price inflation has decelerated rapidly from over 2% until the summer to just 0.3% in the last three months, indicating an annualised growth rate of only 1.4%. We anticipate our index to record quarterly price declines throughout the first half of 2023, leading to a negative annual rate by mid-year.
This pattern is evident across all regions and countries of the UK as weaker demand, driven by higher mortgage rates, cost-of-living pressures, and low consumer confidence, impacts price growth across all markets.
Sellers are now accepting more substantial discounts to their asking prices to secure sales. The gap between asking prices and actual selling prices has widened to 4% in the last month, down from zero percent in early October. We predict that discounts will continue to increase further in 2023. However, at this stage of the year, fewer homes for sale are undergoing asking price reductions as sellers wait to assess the market's performance in January before making any adjustments to pricing.
Summary:
UK house prices rose by 7.2% in 2022.
Quarterly growth has slowed significantly and is likely to turn negative in Q1.
Discounts to asking prices have expanded to 4%.
Buyer demand is 50% lower than last year, with new sales agreements down by 28%.
Affordability and value for money will be crucial factors shaping the housing market in 2023.
House prices in affordable markets are less affected by higher mortgage rates than in high-value markets, where prices have underperformed.
The trend of moving to rural and coastal areas is reversing.
Flats and urban areas are expected to perform better in 2023.
