UK house price

Putting UK house price performance into perspective

Another house price indices reveals a slight drop in UK property values, but here are some reasons why it’s important to pan out and gain a better view of the situation.

Between December 2021 and December 2022, the average UK house price increased by 2%, according to the latest Halifax house price index examining December’s property performance figures.

On a month-on-month basis, the index reported an overall decline of 1.5% in prices since November 2021. This means the average home is now worth approximately £281,272 compared with £285,425 in November. The data also revealed that the annual rate of growth has slowed down.

Much of this is what forecasters have largely been predicting, based on the difficulties being created by the cost of living crisis, inflation and rising mortgage interest rates, which can all directly affect the housing market.

Yet, when dealing with the UK property market, most experts acknowledge that focusing too closely on individual monthly or even yearly house price indices is not helpful for those who enter the market with long-term plans. There are a number of other factors to take into account.

Take note of the regional variations

Most of the house price indices being released tend to present trends based on the average UK or England property prices. Some may hone in on regional trends as a whole, which can show a more varied picture, but from an investment perspective, looking more closely at particular towns, cities and areas is key.

Not all areas of the housing market are expected to see deterioration. Locations with upcoming regeneration projects, transport overhauls or imminent targeted local funding, for example, could all see their prices remain buoyant in comparison to the market at large.

In Halifax’s index, the likes of eastern England, the West Midlands and Wales did not see any house price depletion in the results, and saw a much smaller price slowdown on a quarterly basis.

A recent analysis from Zoopla delved into the particular towns and cities that had seen particularly strong performance over the past year and are better placed to weather any storms. Its top five locations were Nottingham, Manchester, Bournemouth, Birmingham and Liverpool.

Anyone considering buying property right now must be mindful of the current climate, while also being aware that there can be vast variations in terms of the performance of particular regions, areas and property types.

Covid house price growth

The rate of growth seen since the pandemic hit in the spring of 2020 has been exceptional. The average asking price of a property has increased by around 20% since December 2019 three years ago, compared with an average annual rate rise of around 3% in the previous three years.

This unprecedented performance was of course not sustainable, nor would it be desirable for a fully functioning housing market.

As Kim Kinnaird, director at Halifax Mortgages, points out, all indices must be viewed “in the context of historic prices“, adding: “The cost of the average home remains high – greater than it was at the start of 2022 and over 11% more than house prices at the beginning of 2021.

“The first half of last year was a very strong period for sellers, between January 2022 and August 2022, the average cost of a home rose by over £17,000 to £293,992 (growth of 6%), setting a new record high.

“As we enter 2023, the housing market will continue to be impacted by the wider economic environment and, as buyers and sellers remain cautious, we expect there will be a reduction in both supply and demand overall, with house prices forecast to fall around 8% over the course of the year.

“It’s important to recognise that a drop of 8% would mean the cost of the average property returning to April 2021 prices, which still remains significantly above pre-pandemic levels.”

Long-term forecast

The latest Halifax house price index marks the 40-year anniversary since the original data was compiled in 1983. Since then, through recessions, economic turbulence, global unrest and interest rate fluctuations, house prices overall have risen by 974%.

This is a good demonstration of how those who intend to own property for a longer length of time, provided they make a well-informed and sensible investment, will see capital growth over the long-term.

New-build properties have recently been highlighted as one of the most future-proof investment options at the moment, in part due to their significantly higher EPC ratings on average, and the fact that high-quality homes are particularly sought after in the private rented sector.

To guard against the higher price tags that can come with brand new properties, many buyers and investors opt to invest off-plan, to maximise future growth potential.

To find out more about off-plan property investment in a number of key locations across the UK, contact the team at BuyAssociation today, or browse some of our current opportunities. 

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