Annual house price growth turns negative for the first time since 2012: Halifax

Posted on Wednesday, June 7, 2023

The annual rate of house price growth fell from +0.1% in April to -1.0% in May, marking the first annual decline in house prices since December 2012, according to Halifax. 

Annual growth fell by -1.1% in May, says Halifax - the first annual decline in house prices since December 2012. However, whereas existing houses are continuing to fall in value (annual growth of -1.9%), prices for new build properties are still rising (+2.8%), although at the weakest rate for nearly three years.

By property type, all except for detached houses (+0.4%) have registered year-on-year declines. The sharpest drop is for flats (-1.9%), followed by terraced (-1.0%) and semi-detached houses (-0.5%).

Nations and regions' house prices

Prices continue to fall on an annual basis across southern England, again led by the South East (-1.6%, average price £385,943), and closely followed by the South West (-1.4%, average price £301,079). In Greater London prices are down over the last year by -1.2% (average price £536,622).

Except for Wales (unchanged at +1.1%, average price £218,365), all areas of the UK have seen annual house price growth weaken in May compared to April, with most now recording a low single-digit rate of property price inflation.

The West Midlands (+2.7%, average price £251,137) remains the best-performing region, followed by Yorkshire & Humberside (+2.3%, average price £205,035).

Scotland (average price £201,596) saw annual growth drop to +1.3% (from +2.2% in April). In Northern Ireland (average price £187,334) growth was +1.5% over the last year (from +2.7% in April).

Kim Kinnaird, Director, Halifax Mortgages, comments:

“House prices were largely unchanged in May, edging down very slightly (-£130) compared to April, with the average UK property now costing £286,532. More notably the annual rate of growth fell to -1.0%, marking the first time since 2012 that house prices have fallen year-on-year.

"Given the effectively flat month, the annual decline largely reflects a comparison with strong house prices this time last year, as the market continued to be buoyant heading into the summer.

“Property prices have now fallen by about £3,000 over the last 12 months and are down around £7,500 from the peak in August. But prices are still £5,000 up since the end of last year, and £25,000 above the level of two years ago.

“As expected the brief upturn we saw in the housing market in the first quarter of this year has faded, with the impact of higher interest rates gradually feeding through to household budgets, and in particular those with fixed rate mortgage deals coming to an end.

“With consumer price inflation remaining stubbornly high, markets are pricing in several more rate rises that would take Base Rate above 5% for the first time since the start of 2008. Those expectations have led fixed mortgage rates to start rising again across the market.

“This will inevitably impact confidence in the housing market as both buyers and sellers adjust their expectations, and the latest industry figures for both mortgage approvals and completed transactions show demand is cooling. Therefore further downward pressure on house prices is still expected.

“One continued source of support to house prices is the labour market. While unemployment has recently ticked up from very low levels, brisk wage growth would over time help to improve housing affordability, if sustained.”

Tom Bill, head of UK residential research at Knight Frank, said:

“This is unlikely to be the last national house price index to fall into negative territory this year. Mortgage rates will keep edging up as wage growth keeps core inflation stubbornly high and we expect prices to fall by around 5% this year.

"However, this isn’t the global financial crisis part two for house prices and any decline will be kept in check by rising wages, low unemployment, cash sales, record-high levels of housing equity, longer mortgages and savings amassed during the pandemic. The UK housing market is coming back down to earth after a strong three years, not falling off a cliff.”

Matt Thompson, head of sales at Chestertons, says:

“In May, we witnessed an evident increase in buyer enquiries; an avalanche effect of the beginning of Spring which is the busiest season of the year and sees more house hunters entering the market throughout April and May. Equally, we registered more sellers listing their homes for sale in May which provided buyers with a more varied selection of properties.

“Still, the strong buyer demand that London experiences have and will continue to contribute to the majority of the capital’s properties holding their value and, in some particularly sought-after neighbourhoods, allow sellers to be insistent on their asking price without allowing room for negotiation.

“In May, the property market was predominantly driven by buyers who were seeking a home rather than an investment. Areas such as Battersea Park, Islington and Camden have thereby been particularly sought-after as they offer a wide choice of property styles, nearby amenities, transport links and schools.”

Gareth Lewis, managing director of property lender MT Finance, says: "These numbers are unsurprising, given the fall in transactions. They also reflect that those who are willing to buy are less bullish when it comes to committing to higher house prices because everything is costing more, so they are going to chip away at the price.

"Mortgage borrowers on the whole, other than perhaps some first-time buyers can still afford a mortgage but just have to be prepared to put their hand in their pocket a bit more. This is all part of what is essentially a re-education process; money isn’t free and you are going to have to pay more for it in future.

"The housing market will inevitably be quieter as a result."

Via @PropertyReporter