Are House Prices Declining in the UK?

UK house prices have been fluctuating in 2023. While some experts predict a decline in house prices, others suggest that high demand may cushion the blow, meaning house prices could fall rather than crash. The UK House Price Index showed that the average house price in the UK fell by 1.2% in March 2023. Year-on-year growth currently stands at 3.5%. However, Nationwide House Price Index reported that average prices remain 4% below their August 2022 peak. Various sources predict that house prices will fall further this year with Zoopla estimating an overall 5% fall and Savills and Knight Frank estimating a 10% and 5% decline, respectively. Capital Economics forecasts that house prices in Q4 of 2023 will be 8.5% lower than in Q4 of 2022.

How are house prices measured?

In general, there are several factors that contribute to the current state of UK house prices:

  1. Economic growth: Improved life standards enable people to earn more and spend more, which can lead to rising incomes and house prices.
  2. Consumer confidence: If people are confident in the economy and their own financial situation, they may be more likely to buy a house.
  3. Interest rates: Low interest rates can make mortgages more affordable, which can increase demand for houses and drive up prices.
  4. Number of households: The number of households in the UK has been increasing, which can lead to increased demand for housing.
  5. Lack of supply: The UK has a shortage of housing supply, which can drive up prices.
  6. Tough planning laws: Planning laws in the UK can make it difficult to build new homes, which can contribute to the lack of supply.
  7. Tax system: The UK tax system rewards home ownership, which can encourage people to buy houses and drive up prices.

It is worth noting that these factors can interact with each other in complex ways, and other factors not mentioned here may also play a role in the current state of UK house prices.

However, more recently interest rates have had a significant impact on UK house prices. With high inflation post covid, supply chain disruptions, geopolitical events and other factors, mortgage rates have been increasing to counteract the high inflation. As a result, when mortgage rates are high there are several consequences.

  1. Reduced Affordability: High mortgage rates mean high monthly payments for homebuyers. This reduced affordability can lead to lower demand for homes, which can lower prices, especially in areas with already low demand.
  2. Landlord Impact: Higher rates may force existing landlords that are not diversified in their real estate portfolio to sell their properties as they cannot afford to pay the mortgage rates. This adds to increased supply vs demand.
  3. Indirect Impact: With higher monthly payments, homeowners might have less disposable income, potentially allowing them to less on housing or other goods and services, indirectly impacting home prices.

Does the housing market change by region?

The UK housing market can vary significantly by region, and there are several factors that contribute to these differences. Here are some ways in which the housing market can change by region in the UK, based on the search results:

  1. Economic growth: Regions with stronger economic growth may see higher demand for housing, which can drive up prices.
  2. Population growth: Regions with faster population growth may see higher demand for housing, which can drive up prices.
  3. Supply of housing: Regions with a shortage of housing supply may see higher prices, while regions with an oversupply may see lower prices.
  4. Affordability: Regions with higher average incomes may have higher house prices, while regions with lower average incomes may have lower house prices.
  5. Interest rates: Regions with higher interest rates may see lower demand for housing, which can drive down prices.
  6. Government policies: Government policies such as Help to Buy or stamp duty changes can affect the housing market differently in different regions.

It is worth noting that these factors can interact with each other in complex ways, and other factors not mentioned here may also play a role in how the housing market changes by region in the UK.

How common are house repossessions?

House repossession is a legal process in which a mortgage lender takes possession of a property due to the borrower’s failure to meet the mortgage repayment obligations causing mortgage arrears. In the United Kingdom, having a repossessed house is a significant concern for homeowners facing financial difficulties. When a property is repossessed, it is usually sold to recover the outstanding debt owed by the borrower. It is typically considered as a last resort by lenders after all attempts to resolve the arrears and find alternative solutions have been exhausted. In 2022, 188,600 homes were repossessed by lenders, according to UK Finance. In the first quarter of 2023, there were 1,200 mortgage possession claims issued in England and Wales. However, repossessions fluctuate on a regular basis, but these changes aren’t always easy to predict. Major economic and political events, like the 2007-2008 global crisis and the 2016 Brexit referendum, have a significant impact on the market.

There are several sources to find help through these tough times. Check sources such as Citizens Advice Bureau and Shelter, or to find out your financial options speak to your lender. Additionally, for other options apart from financial direction, we may be your solution. Don’t wait, contact us today so we can help you figure out your next steps. Feel free to reach out and contact us at 02080595003 or at