House prices have suffered their biggest fall since 2008 this year after buyers were put off by a sharp rise in borrowing costs.
The average price this month was £257,443, around 1.8 per cent lower than a year ago, according to figures from lender Nationwide.
It means prices are 4.5 per cent lower than their all-time high in summer 2022 – and housing association experts said there is unlikely to be a 'rapid recovery' in 2024.
Robert Gardner, Nationwide's chief economist, said: 'Housing market activity has been weak in 2023.'
The number of transactions involving a mortgage fell by around a fifth compared to pre-coronavirus levels, “reflecting the impact of higher financing costs,” he added.
House prices this year suffered the biggest fall since 2008 after a sharp rise in borrowing costs deterred buyers
Hopes are growing that with inflation falling, the Bank of England could start cutting interest rates from next spring, after keeping its key interest rate at 5.25 percent last month.
But with borrowing costs falling only “moderately” and the economy still sluggish, home prices could fall another 2 percent next year, Gardner warned.
He added: 'A rapid recovery in activity or house prices in 2024 seems unlikely.
'While cost-of-living pressures ease… consumer confidence remains weak and surveyors continue to report modest levels of new buyer demand.'
The 1.8 percent year-on-year decline recorded in December was worse than the 1.4 percent decline economists had predicted ahead of yesterday's figures.
And it's the biggest decline over a calendar year since a 15.9 percent slump during the 2008 financial crisis.
However, it was a slight improvement from November's 2 percent year-on-year decline.
The average house price this month was £257,443, around 1.8 per cent lower than a year ago
And if we compare month by month with November, prices remained unchanged.
Mr Gardner said buyers are struggling to afford homes amid rising mortgage costs, which in recent months were still more than three times their record lows in 2021.
A typical starter would have to spend 38 percent of their take-home pay on their monthly mortgage payment, well above the average of 30 percent in previous years.
And the cost of a deposit to get into the housing market remains “unaffordable” for many, Mr Gardner warned.
A 20 percent down payment on a typical starter home equates to 105 percent of the average gross annual income.
Still, there have been “encouraging signs”, with mortgage providers cutting the interest rates offered to borrowers in anticipation of cuts from the Bank of England, which should help stimulate the market in the longer term, Mr Gardner argued.
“It seems likely that a combination of solid income growth, together with modestly lower house prices and mortgage rates, will gradually improve affordability over time, with housing market activity remaining fairly subdued in the meantime,” he said.
Regionally, East Anglia performed the worst in 2023, with prices falling 5.2 percent year-on-year, while London saw a 2.4 percent decline. However, in Northern Ireland prices rose by 4.5 percent and in Scotland by 0.5 percent.