A UK bank has revealed that the South East saw the biggest monetary increase in house prices during 2022 - but that national prices are likely to drop in 2023.
Halifax, which tracks house prices through its monthly House Price Index, has used the data from 2022 and other economic indicators to predict what the housing market will look like in 2023.
The bank says that it expects house prices to fall next year by eight per cent, but that forecast uncertainty “remains high” as the current economic environment is changeable.
The eight per cent drop would bring national average house prices back to approximately the same level that they were in April 2021.
Throughout 2022, the South East’s housing market recorded the biggest price increase, rising by £28,068 over the 12 months to the end of November.
And while house prices in the region did drop last month - along with every other region except for the North East, which saw the biggest house price increase in percentages - they still retained the highest monetary price increase annually.
Reviewing 2022’s data, Halifax noted that the market was “buoyant” during the first six months, due to low interest rates and post-pandemic shifts in preferences keeping demand high.
This means that the latest average house price recorded by Halifax, in November, is £285,579 compared to £272,778 a year ago, a rise of £12,801.
However, the figure is lower than it could have been, as in the second half of the year, prices flattened, and fell towards the tail end due to the increasing cost of living and interest rates.
Halifax says that this drop will continue into 2023, with an eight per cent decrease in house prices.
Andrew Asaam, Homes Director at Halifax, said: “It was a tale of two halves for the UK housing market in 2022.
“The year kicked off with average house prices continuing to rise at pace, still supported by low interest rates and strong demand from buyers.
“This meant the typical property had added more than £17,500 to its value by June.
“Following such rapid house price growth, and the growing economic headwinds, a slowdown was almost inevitable.
“We saw this play out with a flattening of house prices over the summer, before the -2.3 per cent decrease recorded in November.
“It’s important to remember we saw some of the biggest house price increases the market has ever seen over the last few years.
“Between March 2020 and August 2022, the average house price increased by nearly £55,000 (23 per cent) to £293,992, a new record high.
“As the increasing cost of living puts more pressure on household finances and rising interest rates impact customers’ monthly mortgage payments, there’s understandably now more caution among both buyers and sellers – particularly following recent market volatility – which has seen demand soften as people take stock."
He continued: “Looking ahead to next year, it will clearly be a more challenging economic environment and the housing market will continue to rebalance to reflect these new norms.
“Though the limited supply of properties for sale will continue to support prices, the pandemic-driven surge in demand has receded, and we’re emerging out of more than a decade of record low interest rates.
“Unemployment is expected to rise and reach around 5.5 per cent. This is relatively low by historical standards, but will be challenging for many people.
“While inflation as a whole may be close to or at its peak, household energy bills are likely to rise again, putting more pressure on household budgets."
Mr Asaam predicted that prices will decrease further next year, by about eight per cent.
“To put this into perspective," he explained, "such a fall would place the average property price back at roughly the level it was in April 2021, reversing only some of the gains made during the pandemic.
“There is still uncertainty around this forecast, with the trajectory for Base Rate (now expected to peak at 4 per cent) and unemployment levels key to determining any future changes.”