Don’t panic! House prices fell just 1.8% in 2023 says Nationwide

House prices fell just 1.8% over the course of 2023 and Northern Ireland and Scotland even saw prices rise, latest data from Nationwide revealed last week.

Some housing market experts had been predicting falls of 25% over the course of the year and some even as much as 35%.

ALL-TIME HIGH

But Robert Gardner, Nationwide‘s Chief Economist, says: “UK house prices ended 2023 down 1.8% compared with December 2022, leaving them almost 4.5% below the all-time high recorded in late summer 2022. Prices were flat compared with November, after taking account of seasonal effects.”

And Gardner says that although housing market activity was weak throughout 2023 largely due to higher borrowing costs the volume of cash transactions continued to run above pre-Covid levels.

He adds: “Even though house prices are modestly lower and incomes have been rising strongly, at least in cash terms, this hasn’t been enough to offset the impact of higher mortgage rates, which in recent months were still more than three times the record lows prevailing in 2021 in the wake of the pandemic.

“As a result, housing affordability has remained stretched. A borrower earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 38% of take-home pay – well above the long run average of 30%.”

REBOUND UNLIKELY

Nevertheless, he warns a rapid rebound in activity or house prices in 2024 appears unlikely.

He says: “If the economy remains sluggish and mortgage rates moderate only gradually, as we expect, house prices are likely to record another small decline or remain broadly flat (perhaps 0 to -2%) over the course of 2024.”

Nathan Emerson, Chief Executive of Propertymark, says: “[We] are optimistic the peak of the turmoil has now hopefully passed; however, recovery does take time and we must remain vigilant.

“It’s important to remember aspects such as almost 1.4 million households across the UK have a fixed rate mortgage deal which will come to an end across the next twelve months.”

And Tom Bill, Head of UK Residential Research at Knight Frank, adds: “There is growing evidence that the worst of this house price correction is behind us.

“As inflation falls, downwards pressure on mortgage rates means demand should strengthen and transaction numbers will move closer to their longer-term norms in 2024.”

The availability of longer mortgages has helped avoid steeper price declines.”

“A tight jobs market, the availability of longer mortgages, the fact more homes are owned outright than with a mortgage and the absence of forced selling due to tougher mortgage stress-testing rules since the global financial crisis have all helped avoid steeper price declines as interest rates normalise.

“Pre-election giveaways may boost sentiment further next year although the UK housing market is likely to stutter ahead of the vote itself.”

Jeremy Leaf, north London estate agent and a former RICS Residential Chairman, says: “Similar to other recent surveys, this data from Nationwide shows more house price resilience despite some serious headwinds attempting to blow the market in a more negative direction.”

LOWER INFLATION

“Lower inflation and strong employment figures are reducing the sting of serious price rises and providing a more balanced market as we move into 2024.

“Looking forward, we see a slightly more positive outlook, with is likely to result in more transitions and prices bumping along a little lower over the next few months at least.”

Matt Thompson, Head of Sales at Chestertons, adds: “December tends to be a quieter time of year in terms of property transactions but buyers have been more motivated this month to continue their search.

“Pent-up demand caused by this year’s economic uncertainty is a key reason for this delay in buyer activity and indicates that 2024 will start off with a rather active property market.”