UK house prices projected to drop 8% next year

LONDON

House prices in the UK are expected to go down nearly 8% in 2023 amid increasing costs of living putting pressure on household finances, data by lender Halifax showed on Friday.

In its latest UK Housing Market Review and Outlook for 2023, Halifax said the market was now rebalancing after the biggest rises in home prices on record.

Halifax said that in November, the price of the average UK dwelling had diminished 2.3%, the greatest since October 2008 and the third consecutive fall.

Kim Kinnaird, director of Halifax Mortgages, said in a statement that while a market slowdown "was expected given the known economic headwinds," including extensive inflation as house prices rose 19% since March 2020, the decline in November reflects "the worst of the market volatility over recent months."

Property in the UK now costs £285,579 (about $348,330) on average, still up £12,000 compared to last year.

Andrew Asaam, homes director at Halifax, said 2022 had been a "tale of two halves."

"The year kicked off with average house prices continuing to rise at pace, still supported by low interest rates and strong demand from buyers," explained Asaam. "This meant the typical property had added more than £17,500 to its value by June."

He added that, after seeing such rapid house price growth and increasing economic headwinds, a slowdown was "almost inevitable."

"As the increasing cost of living puts more pressure on household finances and rising interest rates impact customers' monthly mortgage payments, there's understandably more caution among both buyers and sellers, which has seen demand soften as people take stock," he added.

Meanwhile, the Bank of England on Thursday increased its policy rate by 0.5 percentage points to 3.5%.

In order to lower inflation to its 2% target, the bank raised its rate for the ninth consecutive time since December 2021, when it was hiked to 0.25% from the previous 0.1%.