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Property Talk: ‘The worst of the market volatility’ strikes the UK property market

Annabel Dixon Annabel Dixon

The Halifax has reported the steepest price drop in almost a decade and a half — but is this the worst or just the start? Annabel Dixon takes a look.

It’s been an eventful few months to say the least. And the decisions people have made in the face of changing dynamics are creeping into house price data. The latest batch, from Halifax, shows that average house prices fell by 2.3% in November — the biggest monthly drop since October 2008.

‘While a market slowdown was expected given the known economic headwinds…this month’s fall reflects the worst of the market volatility over recent months,’ explains Kim Kinnaird, director of Halifax Mortgages.

‘Some potential home moves have been paused as homebuyers feel increased pressure on affordability and industry data continues to suggest that many buyers and sellers are taking stock while the market continues to stabilise.’

The monthly drop in house prices is unlikely to bring much festive cheer to some corners of the housing market — investors and downsizers might be concerned. But it will come as welcome news for first-time buyers, points out Simon Bath, CEO of iPlace Global. Still, potential hurdles remain for buyers hoping to get onto the housing ladder, such as the rising cost of living and increasing interest rates.

An interesting nugget in the Halifax data is that Wales and south west England — both property hotspots during the pandemic — have seen the sharpest slowdown in annual house price growth. This suggests that pandemic-fuelled trends, such as the ‘race for space’ and demand for more rural lifestyles, are waning — a theme  picked up recently by property portal Zoopla. It found that the number of new sales has fallen by up to 50% in property hotspots and high-value areas, such as the more pricey parts of southern England (excluding London), East Midlands and Wales.

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What happens next? Market watchers may now be getting accustomed to falling UK house prices: November’s drop was the third in a row, according to Halifax. And there are forecasts that suggest the downward trend is set to continue in 2023.

But views vary, naturally. David Hannah, group chairman of Cornerstone Tax, predicts that we’ll see house price growth between 5-8% next year. Why? He expects growth to be led in large part by foreign buyer demand. ‘We now have a growing number of people that want to move to the UK,’ he says.

‘The first is the overseas investor who regards UK property as a safe haven for their money because the country they principally live in is not economically or politically safe. The second are those who want to become second homeowners. The third and final group is those who want to leave their country of birth and are in need of a home.’

Of course, no one knows for sure what’s in store for next year. But, as Kinnaird says, it’s worth looking at the big picture.

‘When thinking about the future for house prices, it is important to remember the context of the last few years, when we witnessed some of the biggest house price increases the market has ever seen.’

And those rises are considerable. Halifax data shows that prices are £46,403 higher than in March 2020, despite the recent dip.