In December, house prices showed no significant change, resulting in an overall decline of 1.8% for the entire year, as reported by Nationwide. However, this average masks notable regional variations. East Anglia experienced the most substantial annual decline at -5.2%, while Scotland demonstrated resilience with an annual growth of 0.6%. Although prices have proven more stable than initially predicted, the slight declines observed may impact the potential for growth later in the year.
The relative resilience of house prices can be attributed to decreasing mortgage rates. Lenders, competing in a sluggish market, have been reducing rates and anticipating an earlier reduction in the Bank of England base rate.
Oxford Economics now predicts the first base rate cut in May, a significantly earlier timeline than previously anticipated. Revised GDP figures in December indicated a weaker economy in 2023 than initially suggested. Coupled with a faster-than-expected decrease in inflation, this shift is likely to redirect economic focus from inflationary concerns to recessionary risks, providing a stronger case for an earlier base rate cut, contingent on upcoming economic data.
Falling mortgage rates have stimulated demand in the housing market, though still below pre-Covid levels. In November, the number of surveyors reporting increased demand rose, albeit still in the minority. Sales agreed also experienced an uptick, reaching a 9-month high in December, according to TwentyCI. New mortgage approvals in November increased to 76% of the 2017-19 average for the month. The growing demand, coupled with a narrowing gap compared to supply, has alleviated the downward pressure on house prices.
While improved market conditions are evident, the translation into completed sales will take time. Months of low mortgage approvals earlier in the year suppressed completed transactions, with November figures showing a 21% decrease below the 2017-19 average at 87,640, according to HMRC.
House price declines have been widespread, particularly in the more affordability-stretched southern regions. Runnymede (-7.2%) and Hastings (-6.4%) experienced the most significant falls in the year to September. In contrast, markets in the North, Midlands, and parts of Wales have demonstrated greater resilience, with the highest growth observed in Rossendale in Lancashire (7.3%) and Blaenau Gwent in South Wales (6.7%).
Annual rental growth across the UK decreased to 9.0% in November, according to Zoopla. While growth remains high nationwide, it has slowed in all regions due to mounting affordability pressures. The South West, North East, and Wales recorded the strongest growth, while 141 (37%) local authorities reported annual increases of 10% or more.