House prices start to plateau as property market ‘grinds to a halt’

HOUSE price falls have started to plateau after four months of consecutive drops.

The average house was £281,684 in January, down just 0.01pc from £281,713 in December, according to mortgage lender Halifax.

This followed sharper monthly falls at the end of last year, with prices dropping by 2.4pc in November and 1.3pc in December. The average house price is now about £12,500, or 4.2pc, below its peak in August.

Analysts said prices had slowed at the start of the year, but that further drops throughout 2023 were to be expected.

Kim Kinnard, of Halifax, said the squeeze on household incomes from the rising cost of living and higher interest rates had led to the slowdown.

She said: “As we move through 2023, that trend is likely to continue as higher borrowing costs lead to reduced demand.”

While prices across the country remained flat, in certain areas drops continued. The sharpest monthly fall was in the East Midlands, where prices fell 2.9pc, from £241,850 in December to £234,946 in January. This was followed by London, where prices fell 2pc to £530,396 in January. The annual price growth in the city is now 0pc, the lowest of any region.

Northern Ireland was the only region to record a very small monthly rise from £183,825 to £183,935 in January.

In the West Midlands, house prices dipped by just 0.9pc, from £250,965 in December to £248,625 in January.

Tom Bill, of Knight Frank estate agents, said offers on homes were still exceeding asking prices in some areas. He said buyers and sellers returning to the market had accepted that a 13-year period of ultra-low interest rates had come to an end.

Falling borrowing costs and relative stability in the economy should help to rule out a 2008-style crash, he said.

The average rate on fixed-term mortgages peaked above 6pc in October but is expected to dip below 5pc in the coming weeks, as lenders try to undercut one another with cheaper deals.

Mr Bill said: “Unemployment remains low and inflation appears to have peaked, so you wouldn’t rule out the housing market surprising on the upside as it did during the pandemic.”

The average two-year fixed mortgage rate was 5.43pc earlier this week, while the average five-year deal was at 5.15pc, according to the analyst Moneyfacts.