Official UK house price growth slowed to 9.8% in the 12 months to December 2022, down from the 10.6% figure for November and below the consensus forecast of 11.2%.
December was down 0.4% month-on-month, the Office for National Statistics numbers showed, and on seasonally adjusted terms, prices fell by 0.2%.
On a seasonally-adjusted basis, economists noted that prices fell outright for the first time since October 2021, when Stamp Duty was reverted back from its temporary higher level.
December's average UK house price was £294,000, which is £26,000 higher than 12 months earlier but a slight drop from last month's record high of £296,000.
“Annual house price inflation, measured using final transaction prices, slowed again in December across the majority of the nations and regions," said ONS assistant deputy director of prices, Chris Jenkins.
He noted that the East Midlands showed the highest annual growth, while Scotland remains the slowest growing part of the UK.
Average house prices increased over the year to:
▪️ £315,000 in England (10.3%)
▪️ £222,000 in Wales (10.3%)
▪️ £187,000 in Scotland (5.7%)
▪️ £175,000 in Northern Ireland (10.2%)
— Office for National Statistics (ONS) (@ONS) February 15, 2023
Private rental prices paid by tenants in the UK rose by 4.4% in the 12 months to January 2023, up from 4.2% for December.
“Rental prices continue to increase at pace with the largest annual percentage change since UK records began in 2016. London’s rental growth continues to pick up with the strongest growth for over seven years.”
Economist Gabriella Dickens at Pantheon Macroeconomics said: "The whack to buyer affordability over the past few months from higher mortgage rates started to weigh more heavily on house prices in December."
She noted that prices "probably have continued to fall this year", with Nationwide’s measure of house prices down for the fifth month in a row in January, the longest period of consecutive falls since February 2009, while 68% of homes were sold under the asking price in December, well above the average over the past two years, 35%, according to the NAEA.
"We think house prices will continue to decline over the next six months or so, resulting in a peak-to-trough fall of about 8%.
"Admittedly, mortgage rates are coming back down from October’s peaks, but they still look set to remain around two and a half times higher than they were at the start of 2022, meaning someone having to refinance will see the share of their incomes absorbed by repayments jump to around 28%, from 21%.
"And a greater number of potential buyers will fail affordability tests, given that they have become harder to pass since Bank Rate has risen. At the same time, real disposable incomes look set to be hit again in Q2 by the withdrawal of government support for energy bills."
Further ahead, she saidf prices have "scope to bounce back", if mortgage rates fall substantially and households benefit from lower wholesale energy prices, leading to Pantheon forecasting a 5% recovery in house prices over the course of 2024.
Jonathan Hopper, CEO of Garrington Property Finders, said: “House prices are correcting, but the change in the direction of travel is happening at oil tanker speed.
“While many would-be buyers paused their moving plans during the chaotic aftermath of the mini-Budget, purchases that had been agreed before proceeded as usual – and as a result the prices paid barely flickered."
He said it was “far from the screeching U-turn some had feared, and while further price softening is likely in 2023, the tumbleweed moment has passed and agents are getting busy again".
With recent mortgage under 4% for a five-year fix returning, Hopper said increasing numbers of buyers are returning to the market, thought these are mostly in the ‘need to move’ rather than ‘want to move’ camp.
“Pragmatic sellers listing their homes for sale are adjusting their price expectations, and this is keeping the market moving – even if transaction numbers are still down on where they should be at this time of year," Hopper said.
“With consumer inflation steadily easing, the Bank of England’s prediction that interest rates may not need to rise much further is a good omen for a property market that is gradually settling into a slower but more sustainable rhythm.”