There’s been a lot of speculation about what might happen to house prices over the past few months, following mortgage and interest rates rises.
Our monthly House Price Index has the most up-to-date monthly data on asking prices in England, Scotland and Wales, so we’re able to see what’s happening in the housing market right now.
This month we’ve seen asking prices fall for just the third time this year. The drop – of 2.1% – takes the national average asking price of a home to £359,137. But there’s lots of variations in each region and country, so to find out how much asking prices are where you live, you can check the map within our full report here.
Why have asking prices fallen in December?
In the past few months, higher interest rates have led to an increase in the average mortgage rates that have been available. While these began to fall last month – down from the highs they reached just after September’s mini-budget – it can mean that mortgage options might be more limited for some buyers, especially first-time buyers.
This has meant that some people who were keen to move have put their plans to move on hold. And with some buyers having seen their budgets reduced, some home-sellers have been pricing more competitively to find a buyer before Christmas
This has all had a knock-on effect on house prices overall. But we still end the year with average asking price growth of 5.6%, which is only slightly lower than the 6.3% last year.
Our property expert Tim Bannister says: “Though we would always expect prices to drop in December, as motivated sellers try to capture the attention of a buyer before Christmas with a competitive price, this monthly dip is the largest we’ve seen for four years.”
“It‘s an understandable short-term reaction to the rapid mortgage rate rises and reduction in availability of mortgage products that we saw in late September and October, before things began to settle down,” he adds.
What does this mean if you’re thinking of selling your home?
In the final few months of the year, we’ve seen demand from home-buyers ease compared to the the previous two and a half exceptionally busy years. After the pandemic ‘race for space’ started to level out, we’d been moving towards a more ‘normal’ kind of housing market, which we last saw in 2019.
Over the past two weeks, the number of people sending enquiries to estate agents about properties for sale is up 4% on the same period in 2019. And the number of views of homes for sale on Rightmove is up 11% on last year, which is a sign that some buyers have started to weigh up their options.
“It’s understandable that some buyers are distracted, not only by the festive season, but also by the thought that they may get a better fixed-rate mortgage deal and a more stable outlook by waiting until the new year. Our data suggests that there are many ready-to-go movers out there waiting for what they feel to be the right time to enter the market in 2023.”
What the ‘Boxing Day bounce’ can mean for home-sellers
If you’ve been thinking of selling your home, December is a great time to get your listing ready. A huge number of would-be buyers view homes for sale on Rightmove over the festive season, and people tend to set up home viewings in the first weeks of January.
Estate agent Rob Kennedy, Director at Philip James Kennedy in Didsbury, has similar advice for home-sellers.
He says: “This year there is a hardcore group of buyers with pre-approved mortgages who want to buy before their mortgage deal runs out and they need to reapply at a higher interest rate. All the signs are that this group will be critical for sales in the new year, so need to be identified and matched.”
“With the keenest sellers having reduced their prices and new instructions being launched, in the coming year the best agents will become a real differential in achieving a sale,” he adds.
What will happen to house prices next year?
We’d usually see a jump in home-mover activity in January, but it takes a while at the start of the year for any significant price changes to feed through. In February we could potentially see a bounce back in prices as we head into the traditionally busy spring home-moving season.
Our property expert Tim Bannister says: “We’re heading towards a more even balance between supply and demand next year, but we don’t expect a surge in forced sales which would cause a glut of properties for sale and contribute to more significant price falls in 2023. This is reflected in our prediction of a relatively modest average fall of 2% next year.”
You can read our housing market forecast for 2023 here.
READ MORE: Our monthly House Price Index