House prices fall nearly 2% over year

Home costs fell 1.8 per cent over the course of 2023, and are unlikely to rebound subsequent 12 months based on Nationwide.

The decline since final December leaves the typical worth virtually 4.5 per cent beneath the all-time excessive recorded in late summer season 2022. Nationwide predicts that they’ll doubtless stay flat or document a fall of as much as 2 per cent within the 12 months forward.

Robert Gardner, the constructing society’s chief economist, mentioned: “Housing market exercise was weak all through 2023. The entire variety of transactions has been working at round 10 per cent beneath pre-pandemic ranges over the previous six months, with these involving a mortgage down much more (round 20 per cent), reflecting the influence of upper borrowing prices. On the flip facet, the amount of money transactions has continued to run above pre-Covid ranges.

“Though home costs are modestly decrease and incomes have been rising strongly, no less than in money phrases, this hasn’t been sufficient to offset the influence of upper mortgage charges, which in current months have been nonetheless greater than 3 times the document lows prevailing in 2021 within the wake of the pandemic.”

Gardner mentioned excessive mortgage charges have been stretching affordability whereas, on the similar time, “deposit necessities stay prohibitively excessive for a lot of of these wanting to purchase”.

He added: “If the financial system stays sluggish and mortgage charges reasonable solely step by step, as we anticipate, home costs are prone to document one other small decline or stay broadly flat (maybe 0 to -2 per cent) over the course of 2024.”

Gardner expects affordability to enhance over time due to earnings development and decrease mortgage charges. But exercise is predicted to stay “pretty subdued within the interim”.

Costs in December have been broadly flat in contrast with November, with the typical UK house now costing £257,443. Northern Eire and Scotland have been the one components of the UK to see costs rise in 2023. East Anglia was the weakest performing area with costs down 5.2 per cent over the 12 months.

Throughout England general, costs have been down 2.9 per cent in contrast with the ultimate quarter of 2022, whereas in Wales there was a 1.9 per cent decline.

Throughout northern England, which includes North, North West, Yorkshire & The Humber, East Midlands and West Midlands, costs have been down 1.8 per cent 12 months on 12 months. Yorkshire & The Humber was the very best performing northern area with an annual charge of change of -0.5 per cent.

Southern England — the South West, Outer South East, Outer Metropolitan, London and East Anglia — noticed a 3.4 per cent year-on-year fall. London was as soon as once more the very best performing southern area, registering a smaller annual decline of two.4 per cent.

All through this 12 months there have been indicators that extra consumers have been trying in direction of smaller, inexpensive properties, with transaction volumes for studios holding up higher than different property varieties. This can be as a result of affordability for studios has held up comparatively higher as they skilled much less of a worth enhance over the pandemic interval, Nationwide mentioned.

“Nonetheless, in our most up-to-date information, we have now seen a convergence within the annual charge of worth development for various property varieties,” Gardner mentioned. “Throughout 2023, the worth of semi-detached properties held up finest, recording a 1.8 per cent year-on-year fall. In the meantime, flats and terraced homes each noticed a 2.1 per cent annual decline, whereas indifferent properties have been the weakest performing with costs down 2.7 per cent over the 12 months.”