Moderate house price falls set to continue

Homeowners who sold at the end of 2022 saw small price falls but it’s doing little to dent the equity most gained during the pandemic.

Most sold homes saw their prices fall in the last quarter of 2022 after a turbulent final few months of 2022.

This meant the average house price rose 6.5% in the year to December 2022, which is the lowest rate of annual growth since May 2021.

It’s a marked slowdown compared to the 8.3% rise in the previous year when moves and prices were still fuelled by the pandemic boost to the market.

And we expect further single-digit price falls in the first half of 2023.

But thanks to a big jump in home values from 2020 to mid-2022, these modest price falls will do little to dent the equity most homeowners have gained over the long-term.

The number of enquiries sent to estate agents fell by 50% in the last quarter of 2022 compared to the previous quarter.

With fewer buyers in the market and sellers less certain about achieving a sale, buyers have gained the ability to drive some bargains.

They’re now getting an average of 3% to 4% off asking prices originally set by sellers.

But discounts now look to be staying at this level and we don’t see any reason for bigger discounts in the coming months.

Our monthly House Price Index uses more data than any other, so we can get the most accurate picture of house prices across the UK.

However, it’s early days to get a clear read on the market outlook for 2023.

Many households thinking about a home move this year are likely to be waiting to see if mortgage rates and house prices fall further.

The economic outlook has improved a little in recent weeks, with mortgage rates settling in the 4% to 5% range.

Buyers and sellers alike will gain confidence from this but the outlook for the housing market in 2023 will become clearer after Easter.

So far, we know that the number of buyers in the market has already rebounded to pre-pandemic levels, in line with 2018 and 10% higher than in 2019.

But priorities are changing as buyers become more value-conscious, with flats and towns near big cities moving up the wish list.

The squeeze on disposable incomes may prompt home moves too, with some seeing it as the time to release equity or find a cheaper-to-run home.

Meanwhile, demand from first-time buyers will remain as they look to escape the rapid growth in rents.

What are buyers looking for in 2023?

While house price falls are never welcome news for homeowners, our latest Value of Housing report might go some way to reassure you.

It found that 92% of homeowners enjoyed value gains on their homes in 2022 despite an uncertain end to the year.

The average capital gain was £19,000 while nearly 3 million homeowners made more than £50,000.

How much value did your home gain in 2022?

The report showed that the total value of homes in the UK is over £10.5 trillion.

With around £1.6 trillion of mortgage value, that leaves homeowners with almost £8 trillion in equity.