Did we get it wrong about investing in UK housing market?

It looks like investors in mainstream UK homes who anticipated losing capital values in the 2023 may have been mistaken - because at least one respected index insists values ROSE last year.

The latest Halifax house price index shows average house prices rose by 1.1 per cent in December, the third monthly rise in a row - and that means property prices actually grew 1.7 per cent overall in 2023.

The typical UK home now costs £287,105, just over £3,000 more than last month.

Even so, the Halifax insists house prices will fall by between 2.0 and 4.0 per cent this year with the south east of England continuing to see most downward pressure.

Northern Ireland continues to be the strongest performing nation or region in the UK, with house prices increasing by 4.1 per cent on an annual basis. Properties in Northern Ireland now cost on average £192,153, which is £7,595 higher than the same time in December 2022

Scotland’s average house price also recorded growth, with the average property in the nation now £205,170, some 2.6 per cent higher or £5,277 in cash terms on an annual basis. North West (up 0.3 per cent) and Yorkshire and Humber (up 0.1 per cent) saw modest house price increases over the last year. 

The South East fell the most during 2023, when compared to other UK regions, with homes selling for an average £376,804 (down 4.5 per cent), a drop of £17,755. 

Unsurprisingly, London retains the top spot for the highest average house price across all the regions, at £528,798, albeit prices in the capital have declined by 2.3 per cent on an annual basis.

Kim Kinnaird, the director of Halifax Mortgages, says: “The housing market beat expectations in 2023 and grew by 1.7 per cent on an annual basis. The average property price is now £4,800 higher than it was in December 2022.

“Whilst it’s encouraging that we saw growth in the last three months of the year, this was preceded with property price falls for six consecutive months between April and September. The growth we have seen is likely being driven by a shortage of properties on the market, rather than the strength of buyer demand. That said, with mortgage rates continuing to ease, we may see an increase in confidence from buyers over the coming months. 

“As we move through 2024, the UK property market will continue to reflect the wider economic uncertainty and buyers and sellers are likely to be naturally cautious when considering making a move. While wage growth is now above inflation, helping to ease cost of living pressures for some and improving housing affordability, interest rates are likely to remain elevated for as long as inflation remains markedly above the Bank of England’s target. 

“Our latest forecast suggests house prices could fall between 2.0 and 4.0 per cent during the coming year, although, as with recent years, forecast uncertainty remains high given the current economic climate.”