Capital appreciation dips but no price crash in sight

House prices rose by 9.8 per cent year-on-year in December compared with the same month in 2021, the Office for National Statistics says. 

Its official house price index is based on completions so appears later than other indicates.

The December ONS increase was lower than November's revised 10.6 per cent rise. 

Jeremy Leaf, a former RICS residential chair and a prominent London agent, says: “The direction of travel of the housing market is no longer strongly up but it’s not sharply down either. These comprehensive but dated figures lay bare the impact on prices of the ill-fated mini-Budget in the fourth quarter of last year. 

“On the ground since, we are finding that buyers still have an appetite. However, they are increasingly flexing their muscles and adjusting to an improving bargaining position as stabilising mortgage rates and inflation bring more balance.”

Frances McDonald of Savills says: “This sits against the backdrop of a significant fall in mortgage approvals in December and highlights the turbulence in the mortgage markets at the end of 2022, following September’s mini-budget. Our expectation is that this will represent a low point for transactions and since then we have seen stabilisation in the mortgage markets and, in particular, a fall in the cost of fixed rate mortgages.” 

Marc von Grundherr, managing director of Benham and Reeves, adds: “What’s important to note is that the rate of decline has been far more marginal than many predicted and this should stand the property market in very good stead for the year ahead.”

And Iain McKenzie, chief executive of the Guild of Property Professionals, states: “It is a gradual readjustment, and fears of an aggressive drop-off in transactions like we saw during the global financial crisis have been put to bed.  The economy is still struggling and this will undoubtedly have a knock-on effect for the property market, but as long as competitive and affordable mortgage offers continue to return, the demand for good-quality housing will remain high. 

“The industry is bracing for an overall decrease of around eight per cent but crucially a fall of this size would only bring house prices down to what they were in 2021.”

Sarah Coles, head of personal finance at business consultancy Hargreaves Lansdown, takes a harsher view. She says: “It seems ridiculous, but it has taken until now for us to see early signs of the impact of September’s mini-budget in the official figures. Sales typically take around three months to complete, but at the moment they’re taking closer to four. It means December's completion figures reflect how the market was looking in September and October. 

“This covered the onset of the mini budget mortgage mayhem. However, even at this stage it won’t have captured the full impact of mortgage rate hikes, because an awful lot of people making buying decisions at this point had already agreed a mortgage at a much lower rate. Instead, we’re seeing the impact on their confidence that they could continue to pay the mortgage in future.

“The full effect of the mini-budget is clearer in mortgage approval data for future purchases. The number of approvals have been dropping since September, and hit 35,600 in December – the lowest level since the market was effectively closed in May 2020. The Nationwide and Halifax indices showing house prices among those approvals have also recorded monthly falls for four months, and the annual rise was less than two per cent in January.”

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