House price growth slows for fourth consecutive month

This compares to growth of 4.4 per cent in November and represents the fourth consecutive month that house prices continued to slow.

The average house price in the UK now sits at £262,068, down from £263,788 in November’s HPI.

Commenting on the figures, Nationwide’s chief economist, Robert Gardner said the monthly change in prices represents a “much smaller decline than in the previous couple of months”. 

He continued: “However, December also marked the fourth consecutive monthly price fall - the worst run since 2008.”

Gardner acknowledged that while financial market conditions have settled, the housing market has shown “few signs of recovery: with mortgage rates not yet normalised".

While it will be difficult, the vast majority of those refinancing should be able to cope — Robert Garnder, Nationwide

“It will be hard for the market to regain much momentum in the near term as economic headwinds strengthen, with real earnings set to fall further and the labour market widely projected to weaken as the economy shrinks,” Gardener said.

A soft landing in 2023?

December’s figures may partly represent an early season slowdown according to Gardner, and as such potential buyers may be waiting until the new year to enter the market.

In Gardner’s opinion, the main factor that would help achieve a soft landing for house prices in 2023 is if forced selling can be avoided. 

“There are good reasons to be optimistic on that front,” he said.

“Most forecasters expect the unemployment rate to rise towards 5 per cent in the years ahead – a significant increase, but this would still be low by historic standards.

“Moreover, household balance sheets remain in good shape with significant protection from higher borrowing costs, at least for a period, with around 85 per cent of mortgage balances on fixed interest rates.” 

Gardner also pointed out that stress testing for mortgages is typically done at an interest rate above current levels, which means “while it will be difficult, the vast majority of those refinancing should be able to cope.”

Nationwide predicts that there will be a modest decline in house prices in 2023, of about 5 per cent.

Broker reaction

Responding to the latest data, some mortgage advisers said they are the prelude to a very difficult year.

Adviser at Mather & Murray Financial, Samuel Mather-Holgate said: “These are the snowflakes that started the avalanche. People will be in no rush to buy properties at the top of the mountain in the New Year.”

“There is plenty of room for prices to fall and I expect little activity in the market until we know where prices decide to settle and that won’t be until late spring. For buyers who are willing to wait until then, that will be the time to bag a bargain,” Mather-Holgate said.

He added: “There will be a lot of distressed sellers needing to offload their properties as they cannot cope with the cost of living. I expect interest rates may have peaked by then.”

Others took a more positive outlook. 

Kag Financial director, Kylie-Ann Gatecliffe said: “Call me an optimist, but I don’t think 2023 is going to be all the doom and gloom that many are predicting.”

“Even if there is a 10 per cent drop in house prices, official data shows that, over the year to August, we saw an increase of 13.6 per cent. There will be less of a housing crash and more of a correction to pre-pandemic prices.”

Adding to this, Zaid Patel, director at London-based estate agents, Highcastle Estates said: “December was always going to be a write-off, with the World Cup adding to the usual seasonal drop-off in demand and the soaring cost of living crisis.

"January will see cash- and mortgage-ready buyers carefully analysing the market, pouncing on any good deals, which will prevent the housing market from crashing."

Regional differences

Across all regions, there was a marked slowdown in annual house price growth this period.

East Anglia was the strongest performing region in 2022 with annual growth of 6.6 per cent, while Scotland was the weakest with annual growth of 3.3 per cent.

Wales saw a significant slowdown in growth in the final quarter of 2022, with annual growth slowing from 12.1 per cent in Q3 to 4.5 per cent in Q4. 

Northern Ireland saw prices increase by 5.5 per cent during 2022, much weaker than the 12.1 per cent rise recorded in 2021.

In England, prices saw a further slowing in growth to 4.8 per cent, from 9.9 per cent in Q3. 

According to Gardner, the gap between the weakest and strongest performing regions was at its lowest level this quarter in the history of Nationwide’s index - which goes back as far as 1974.

jane.matthews@ft.com