House prices increased only 0.3% in last three months of 2022, Zoopla says

House prices have risen by just 0.3 percent in the past three months, according to the latest data from real estate website Zoopla.

A slowdown towards the end of the year has reduced the annual rise in house prices to 7.2 per cent, meaning houses are now worth £17,500 more on average than a year ago.

However, prices are expected to fall in the coming months.

The real estate site expects price growth to continue to slow in the first half of 2023, resulting in a mid-year decline. Zoopla expects home prices to fall by up to 5 percent by the end of next year, bringing its forecast in line with Nationwide’s.

Others are stricter, however, as Savills expects prices to fall by as much as 10 percent in 2023.

Zoopla’s latest home price index also says demand to move has halved over the past 12 months as cost-of-living pressures and higher mortgage rates have led more potential buyers to take a wait-and-see approach.

While the number of negotiated sales has dropped by only 28 percent over the same period, sellers are accepting much larger discounts on their homes.

In November, sellers accepted an average discount of 4 percent off their initial asking price.

Most market activity figures are similar to pre-pandemic levels, Zoopla said, but it added that 2018 and 2019 were also slow years as Brexit and broader economic uncertainty weighed on the market.

Richard Donnell, executive director at Zoopla said: ‘2022 was a strong year for the housing market with the second strongest year for sales in over a decade at 1.3 million.

‘The consequences of the mini-budget, with mortgage interest rates of 6.5 percent, almost brought the market to a standstill in the last quarter.

“We expect buyers to re-enter the market in the new year, but they will be much more cautious and price sensitive. Serious sellers should be realistic about price and get a real estate agent’s advice on how to market their home.

“Although mortgage rates will start lower in 2023, the impact on prices will be felt more in the more expensive markets of southern England than in the more affordable markets elsewhere.”

Mortgage rates rose rapidly in the autumn, increasing the monthly cost of borrowing by hundreds of pounds and making buying unaffordable for many. Affordability is likely to be the most important factor driving house prices in 2023 as household finances continue to be squeezed by double-digit inflation.

On August 1, 2022, the average two-year fixed mortgage rate for all deposits was 2.52 percent, according to data from Moneyfacts.

The figure peaked at 6.65 percent on October 20, and the five-year fixed rate peaked at 6.51 percent on the same day. However, the average fixed rate for both two- and five-year mortgages has steadily declined since then.

Most now expect mortgage rates to fall somewhere between 4 and 5 percent next year.

Currently, the two-year fixed rate average is 5.8 percent, while the five-year average is 5.61 percent, which continues to fall despite the Bank of England’s recent rate hike to 3.5 percent; the highest level since October 2008.

The end of the race for space?

The data also shows buyers are eager to return to cities, after many moved to coastal and rural areas with more space during the pandemic.

Housing in rural and coastal areas in the south of England has seen a drop in demand, with East Kent down 0.5 per cent.

Demand in the Lake District also fell by 5 per cent over the year and in Shrewsbury prices fell by 10 per cent.

Return from the city: In coastal and rural areas such as the Lake District (pictured), demand has fallen over the past year

In contrast, demand is greater in more affordable urban areas. Bradford saw demand rise 61 per cent year on year, while Southend rose 47 per cent and Milton Keynes rose 45 per cent.

Continued job growth is expected to boost demand in these more affordable cities next year.

It was revealed yesterday that the most expensive street in the country is Phillimore Gardens in London, where the average house price is £23.8 million.

London dominates the list of Halifax’s most expensive streets, with only one road outside the capital making the top 20.

Apartments offer better value for money than houses after the pandemic has eroded demand

Buyers who are less concerned about the need for space and the size of their home will also benefit from flats offering better value for money than houses.

Apartment pricing is currently underperforming the wider market as the need for space during Covid meant they didn’t face such high demand.

The average price of a house in London is 1.7 times the price of a flat, compared to 1.4 times a decade ago. The same is true for the rest of the UK, where the price difference is currently 2.1 times higher, the highest in 20 years.