House Price Index - January 2023

“It’s going to be a slow start to 2023 but we expect demand to pick up in the coming months as the economic outlook becomes clearer and mortgage rates settle around 4% to 4.5%”

The house price growth experienced a significant stall in the last quarter of 2022, primarily due to a 50% drop in buyer demand during that period. As a result, the annual rate of price growth is expected to see a rapid slowdown in the upcoming months. By the end of 2022, UK house price inflation had decelerated to 6.5% from 8.3% at the close of 2021, with this trend observed across all regions except London.

Various areas registered minor price declines in Q4 2022, as buyers became more assertive in negotiating prices. The discounts required to achieve a sale expanded rapidly towards the end of 2022. However, the current gap between asking and achieved prices, at 3% to 4%, has stabilised, showing no indications of worsening at this stage.

It is critical to monitor this gap because a widening disparity may lead sellers to feel increasing pressure to reduce asking prices, potentially exerting further downward pressure on overall house prices. Modest price reductions are anticipated in Q1 2023, as sellers continue adjusting asking prices in line with buyers' willingness to pay.

Executive Summary:

  • House price growth came to a halt in Q4 2022, resulting in a lower annual rate of house price inflation at +6.5%

  • Most regions experienced slight price declines during Q4 2022

  • Demand has rebounded to pre-pandemic levels, reaching figures similar to those in 2018 and surpassing 2019 levels by 10%

  • IThe initial months of Q1 will see a slow start, with early buyers showing a preference for flats over houses due to increased borrowing costs and reduced buying power

  • Demand is expected to pick up in the coming months as mortgage rates continue to decline, and potential buyers realise that significant price drops are unlikely to occur

Read the full report.