Property Market Update: December 2023

Welcome to the December edition of the Property Market Update! We've collated information from experts from across the UK to provide you with a comprehensive view of the current market.

With this being the final update for 2023, we begin by examining the overall trajectory of average house prices. Though falling by 1.8% annually, it’s possible that they could have fared much worse.

Rightmove reports that asking prices fell in December beyond the 20-year recorded average for that time of year. This not only reflects broader economic indicators but also underscores a proactive approach from sellers, as they heed agent advice to price their properties strategically.

Mortgage rates fell in December and are continuing to fall into 2024. We look at these positive signs in closer detail.

In other news, Zoopla forecasts that 40% of those looking to buy a home in 2024 and 2025 will be first-time buyers.

House prices withstand storm, falling only 1.8% in 2023

UK house prices fell by 1.8% over the course of 2023 according to Nationwide in their December update. Over the last six months, the total number of property transactions ran 10% below pre-pandemic levels.

House purchases financed with a mortgage were especially affected, being down 20%. This is because despite lower house prices, and wage growth rising above inflation, interest rates remain elevated, with inflation hovering 1.9% above the Bank of England’s target.

Higher mortgage rates, some often three times higher than the lows recorded in 2021, are still affecting the autonomy of homeowners wishing to make a move.

Despite all this, the market performed better than expected in 2023. Halifax reports that house prices grew for the third month in a row to £287,105 (+1.1%), reaching their highest level since March 2023.

While this growth can be attributed to a shortage of housing stock rather than buyer demand, many expected much larger price falls over the course of the year than what was recorded.

Thanks to government-backed schemes like the Mortgage Guarantee Scheme, designed to assist individuals with limited deposits, and stronger mortgage affordability testing (introduced in 2015), house prices were able to withstand the harsher implications of mortgage rates rising from 2% to 6% in 2023.

Largest December asking price dip in 20 years as sellers get competitive

Average new seller asking prices fell by 1.9% (-£6,966) to £355,177 in December, as reported by Rightmove. This decrease surpassed Rightmove's 20-year historical average decline for December, which stands at 1.5%.

Winter typically presents a subdued period in the UK housing market, with homeowners often listing their properties due to compelling reasons. Consequently, their asking prices frequently reflect a strategic approach to attract potential buyers.

The larger than average 0.4% swing to 1.9% can be attributed to the adversities of 2023: the market’s transition into a buyer’s market (more available stock, price falls etc.), as well as stretched affordability, with higher mortgage rates and cost of living. It’s a sign that homesellers are listening to their estate agents, and pricing lower from the offset, in order to capture the attention of potential buyers.

Mortgage rates continue to fall steadily

Throughout December, mortgage lenders made significant cuts to the rates of available mortgage deals.

On Friday 8th December, financial information service, Moneyfacts, reported that the average cost of a two-year fixed rate dipped below 6% for the first time in six months, settling at 5.99%. The average five-year fixed rate fell to 5.6%.

In January, interest rates continued their decline, with Barclays and Santander reducing rates by as much as 0.82% on Wednesday.

According to Moneyfacts, two-year fixed deals currently sit at 5.76%, while five-year deals are at 5.37%. Compared to the summer rates ranging between 6.5% and 7%, these reductions offer encouraging prospects for homeowners planning to take action in the upcoming months.

It’s possible that the cheapest two-year fixes could fall below 4.5% in early 2024. But these hopes rest on the momentum of future changes to the Bank of England’s base rate. While it’s predicted that the base rate will fall to 4% in the next 12 months, there are numerous factors that could influence its trajectory.

Zoopla: First-time buyers will be largest buying group in 2024

In its latest consumer survey of homemoving intentions, property portal, Zoopla, found that 40% of people looking to purchase a home within the next two years are first-time buyers.

To put this into perspective, upsizers (typically buying a larger home and a larger mortgage) account for just a third of would-buyers.

Why are first-time buyers the largest buyer group?

First-time buyers are among the most pressured buying groups in the UK, facing larger deposits and higher mortgage rates than many will have faced in over a decade. Despite these affordability challenges, the rapid growth of rental costs continues to motivate this group to pursue a step on the property ladder. Average rents have risen much faster than average mortgage repayments over the last three years.

Summary: And that’s a wrap!

…And that’s the last of our market updates for 2023! We’ll be back next month with a review of January 2024. It’s usually a busy time for the market, so there should be more numbers to crunch.