Halifax is expecting property prices to drop in the new year but says the price rises during the pandemic were some of the biggest the market has ever seen.

The lender predicts that UK house prices will fall next year by around 8%. However, it says that forecast uncertainty for house price predictions in 2023 remains high, given the current economic environment.

Reflecting on the property market in 2022, Halifax says the market remained buoyant in the first half of the year, as lifestyle and location changes due to the pandemic resulted in more people wanting to move. Interest rates were lower in the first half of this year, and there were more buyers than properties.

From mid-year onwards, house prices started to flatten and fell near the end of the year, as the increased cost of living put more pressure on household finances and rising interest rates pushed up mortgage costs.

House prices went up in the first half of 2022

Despite rising prices in the first half of 2022, Halifax predicts that the property market in 2023 will dip. ‘It was a tale of two halves for the UK housing market in 2022,’ says Andrew Asaam, Homes Director for Halifax. ‘The year kicked off with house prices continuing to rise at pace, still supported by low interest rates and strong demand for buyers. This meant the typical property had added more than £17,500 to its value by June.’

Asaam adds: ‘Following such rapid house price growth, and the growing economic headwinds, a slowdown was almost inevitable. We saw this play out with a flattening of house prices over the summer, before the -2.3% decrease recorded in November.’

Biggest house price increases

Despite the recent price dip and its prediction for 2023, Halifax is keen to put things into perspective. ‘It’s important to remember we saw some of the biggest house price increases the market has ever seen over the last few years,’ says Asaam. ‘Between March 2020 and August 2022, the average house price increased by nearly £55,000 to £293,992, a new record high.’

The average UK house price is now £285,579 compared to £272,778 a year ago – a rise of £12,801.

Challenging economic environment

Next year is predicted to be a more challenging economic environment, but the limited supply of properties for sale will continue to support prices. If prices fall by 8% next year, this would place the average property price back to roughly the level it was at in April 2021, reversing only some of the gains made during the pandemic.

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