How fast are house prices falling?

December 16, 2022

House price growth has dropped in the last months, but what is the true situation regarding house price falls?

As more data comes in, mortgage lenders and property experts have been offering mixed predictions about how far house prices will drop.

Impact of mortgage costs

According to Halifax, the cost of mortgages could cause a fall in house prices. Halifax’s house price index reports annual house price growth fell to 4.7% in the year to November, that’s a drop from 8.2% the previous month. Significantly, it showed a 2.3% monthly reduction in prices in November – the most since 2008.

Meanwhile, Rightmove reported a 1.3% drop in the average house price between July and August 2022, but over the year, house prices rose by 8%.

Nationwide said annual house prices increased by 4.4% in the year to November 2022 but fell from October’s level of 7.2% – with a 1.4% reduction in house prices month-on-month. This 1.4% fall is the second monthly dip in 15 months and the biggest monthly fall since we were in the midst of the pandemic in June 2020.

Robert Gardner, Nationwide’s chief economist, commented: “The market has undoubtedly been impacted by the turmoil following the mini-budget, which led to a sharp rise in market interest rates. Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation.”

House price growth falls

Zoopla reported that house price growth over the last three months fell to 0.7% – its lowest level since February 2020. Annual UK house price growth has slowed to 7.8% – with the average house price now £261,600.

Richard Donnell, Director of Research and Insight at Zoopla, said, “We still expect house price falls of up to 5% next year with 1 million sales and mortgage rates dipping below 5%. But the number of sales going through will remain buoyant for a range of structural, demographic and economic factors.”

Sellers reduce prices

According to Zoopla, 1 in 4 sellers have reduced the price on their property since 1 September 2022, and they report that 11% have reduced their price by 5%+.

The south of England has seen the biggest number of price reductions, with nearly 1 in 3 properties reducing their asking price since the start of September. This area has also seen the greatest decline in the number of sales.

Cities with more affordable housing markets are faring better than the south, including cities such as Manchester, Nottingham and Birmingham, which have seen above-average house price growth over the last year.

Buyers are beginning to demand discounts from sellers, with the average discount rising to 3% in recent weeks. But these are still modest price reductions.

What’s in store for 2023?

Predicting house prices in 2023 is difficult as it’s likely to vary considerably across the country. But regions with expensive housing markets are likely to be more affected by higher mortgage rates than those that offer more affordable housing.

Would you like to learn more about property investment?

We are running our 2 day Property Investing Masterclass – An Introduction to Property Investing on 13th and 14th January. Click here for more details and to book.

This course will provide you with an introduction to property investment, whether you’re new,  intermediate or experienced.

Share Us on

if you are looking to become financially free through property

come & join our property family

Take action today and unlock your full potential.