UK house prices drop by 2.3% in a month

UK house prices saw their biggest drop since the 2008 financial crisis, falling 2.3%, reflecting "volatility" in the market, according to mortgage provider Halifax.

Data published on Wednesday by mortgage lender Halifax showed that average house prices declined 2.3 per cent between October and November. That was the largest monthly drop since October 2008, the third-largest single-month decline in the index’s 40-year history, and follows a 0.4 percent drop in between September and October and a 0.1 percent fall between August and September. The average UK house price in November was £285,579.

Higher mortgage rates, economic uncertainty, and the rising cost of living are all affecting the market. The annual rate of growth in property prices has now dropped from 8.2 percent to 4.7 percent. Kim Kinnaird, director of Halifax Mortgages, said: "While a market slowdown was expected given the known economic headwinds - and following such extensive house price inflation over the last few years, this month's fall reflects the worst of the market volatility over recent months.

"Some potential home moves have been paused as homebuyers feel increased pressure on affordability and industry data continues to suggest that many buyers and sellers are taking stock while the market continues to stabilise,” Kinnaird noted. “When thinking about the future for house prices, it is important to remember the context of the last few years, when we witnessed some of the biggest house price increases the market has ever seen. Property prices are up more than £12,000 compared to this time last year, and well above pre-pandemic levels (+£46,403 vs March 2020).”

However, she said that the falls should be put into context, given the rapid increase in property prices in the last few years. Property prices were up more than £12,000 compared with this time last year, and £46,403 higher than in March 2020 when the Covid pandemic began.

Rising borrowing costs squeeze prospective homebuyers, sparking a 2.3% decline for November.

The slowing market is reflected across the UK, with most nations and regions seeing the rate of annual house price inflation fall last month. The only exception remains the North East of England, which saw its rate of annual growth edge up slightly to +10.5 percent (from +10.4 percent). It’s also now the only area of the UK with annual house price inflation in double figures, with an average property price of £173,587.

Wales (+7.9%, average price of £220,689) and the South West (+8.4%, average price of £307,750) have seen the sharpest slowdown of annual growth (from +11.5% and +10.7% respectively). Scotland has also seen its pace of annual house price inflation continue to slow, now at +6.5% from +7.4% with a typical property now costing £203,132. House prices in Northern Ireland are up +9.1% YoY, easing back from +9.7% last month, with an average property price of £185,097.

The pace of annual property price inflation also slowed in London, which continues to lag the other UK regions and nations. House prices have risen +5.2% over the last 12 months, down from +6.6%. The average property price in the capital remains well above the UK average at £549,160.

According to Halifax, the market may now be going through a process of normalisation. While some important factors like the limited supply of properties for sale will remain, the trajectory of mortgage rates, the robustness of household finances in the face of the rising cost of living, and how the economy – and more specifically the labour market – performs will be key in determining house prices changes in 2023.

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