UK house prices fell 0.6% in January

The average UK house price fell by 0.6% in January, according to the Nationwide, which means they are 3.2% below last August’s peak. 

Annual house price growth slowed to 1.1% from 2.8% in December, the building society figures showed, with the average house costing £258,297 this month.  

The figures come despite some data in the last month suggesting demand returning to the market in January more quickly than expected, with property portal Rightmove reporting a 0.9% uplift in prices in the middle of the month.

Robert Gardner, Nationwide’s chief economist, said mortgage rates were “normalising” but added it was “too early to tell whether activity in the housing market has started to recover”. 

“The fall in house purchase approvals in December reported by the Bank of England largely reflects the sharp decline in mortgage applications following the mini-budget,” Gardner explained. 

Bank of England figures yesterday showed mortgage approvals in December fell to their lowest level - covid aside - for 14 years. Mortgage rates rose after the disastrous mini-budget in September last year. 

Gardner added “the overall affordability situation looks set to remain challenging in the near term”.

“Saving for a deposit is proving a struggle for many given the rising cost of living, especially those in the private rented sector where rents have been rising at their strongest pace on record,” he said. 

However, the chief economist stated that if recent mortgage rate reductions continue this “should help improve the affordability position for potential buyers, albeit modestly, as will solid rates of income growth”. Average regular pay growth for the private sector was 6.9% in August to October 2022, according to Office for National Statistics figures last month.  

Affordability pressures remain particularly acute in London and the south of England, where mortgage servicing costs have risen sharply compared with a year ago, Gardner noted. 

The Nationwide’s figures reflect those of other indices, such as that of property agent Zoopla, which showed annual UK house price growth slowed to 6.5% in the last quarter of 2022. 

Ratings agency S&P Global has predicted UK prices will go down 3.5% in 2023, which is the steepest drop in Western Europe after Portugal, where the fall is expected to be 4.4%. The Construction Products Association this week said it expects housebuilding starts to fall 14% in 2023, with housebuilding output dropping by 11%.