UK house prices see sharpest annual drop in a decade amidst slow growth and stubborn inflation

According to today’s UK House Price Index from the Office for National Statistics, average UK house prices are now £285,000 in November 2023, 2.1 % lower than in November 2022. The latest figures are also almost 1% lower than October 2023 and 2% lower than September 2023. 

London saw the steepest annual decline (6.0%) in average house prices, with a 2.2% fall on October 2023. 

Stacy Eden, national head of real estate and construction partner at leading audit, tax and consulting firm RSM UK, comments: ‘The record falls in house prices in the year to November 2023 are painting a picture that the cost-of-living crisis, inflation, and relatively high interest rates are continuing to put downward pressure on house prices, although this is being countered by a lack of housing which is propping up prices. With widespread falls across the UK, we expect to see house prices continue a gentle downward trend, underpinned by a chronic lack of supply. This is especially true in London, which saw the steepest annual fall in house prices since 2009. However, there is a feeling that the corner is being turned as we look forward to lower interest rates in 2024 with the cost of five-year mortgages falling to below 4%.

‘What is of concern is the dramatic fall in transactions which is approximately 20-25% below expected normal levels, and there is an argument that the market has partly come to a standstill with buyers and sellers holding fire and housebuilders significantly scaling back on activity. Furthermore, with inflation at 4%, higher than market expectations of 3.8%, a cut in interest rates may be pushed back which could delay the expected rise in house prices later this year. However, on a national level, the price of new builds has increased by more than 8% over the last year, which shows that developers are responding to what people want, with new builds generally providing lower energy and maintenance costs.’

He added: ‘As the government looks for supply side reforms to kickstart the UK economy, then resolving the supply and demand equation (through planning reforms) seems to be an obvious place to start. It is quite clear the opposition realise the shortage of housing is causing too many people to rely on the state to provide their housing needs as rental growth causes rent to take too high a proportion of income. However, the government seems to be unable to deal with the chronic lack of housing – highlighted by scrapping local targets. With the Autumn Statement falling short on tackling this issue, the industry will be hoping the Spring Budget outlines plans to reduce SDLT, bring liquidity to the market, and ensure transactions rise to a normal level of 100,000 per month.’