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House prices graph showing the fluctuation of UK house prices

At the time of writing, we are still in the traditionally slower winter market. However, UK house prices have been steadily rising in recent years, driven by various factors such as low-interest rates, limited supply, and high demand. According to the Office for National Statistics (ONS), the average house price in the UK in December 2022 was £252,000, a 7.2% increase from the previous year.

Rightmove, a leading UK property portal, reported on the 17th January “This month we’ve seen the average asking price of a home in Great Britain rise by 0.9%, to £362,438.

The price growth follows an uncertain final few months in the housing market in 2022 and two months of price falls in November and December. But average prices are still 2% lower (£8,720) than at their record peak in October last year.

Asking prices usually increase in January, after the traditionally quiet home-moving period leading up to and during Christmas. But this year’s price boost has been the biggest at this time of year since 2020.”

London continues to be the region with the highest average UK house prices, with the average property costing around £485,000 in December 2022. The South East and the East of England also have high average prices, with the average property costing around £325,000 and £290,000, respectively. On the other hand, Northern regions such as the North East and the North West have the lowest average prices, with the average property costing around £135,000 and £160,000, respectively.

Everybody wants to have the best house - this image shows houses stacked on coins, with the largest being on the biggest house - UK house prices

The Home Counties

The average UK house prices in the southern home counties of Surrey, Hampshire, and Sussex are generally lower than those in London. According to the Office for National Statistics (ONS), the average house price in Surrey in December 2022 was £450,000, while in Hampshire, it was £310,000, and in Sussex, it was £310,000. These prices are lower than the average house price in London, which was £485,000 in the same period.

Despite being lower than London, the average house prices in Surrey, Hampshire, and Sussex are still relatively high compared to other regions in the UK. This is due to a combination of factors such as the proximity to London, good transport links, and a high standard of living.

The current UK housing market is characterised by a limited supply of homes for sale and high demand, which has driven up prices. This has been exacerbated by the COVID-19 pandemic, which has led to an increase in demand for larger homes in the country with more space and a garden, as well as a reduction in the number of properties coming to market. Additionally, the government’s stamp duty holiday, introduced in July 2020 and extended in September 2022, has increased demand as buyers look to take advantage of the temporary reduction in stamp duty.

A coloured question mark in among a sea of dark ones - offering on a house - UK House prices

Affordability

Despite the rise in prices, the UK housing market remains affordable for many, with low-interest rates making mortgage payments more manageable for borrowers. The Bank of England has kept interest rates at a historically low level of 0.1% since March 2020, and this is expected to remain the case for the foreseeable future. This has made it easier for buyers to secure a mortgage, even if they have a limited deposit.

[(June 24) – clearly for sometime now, interest rates have been considerably higher than at the time of writing this blog – however, this has not deterred what is seemingly a competitive market in the home counties for prices over £1,000,000.]

However, the UK housing market is not without its challenges. Some commentators believe that the ongoing Brexit process and economic uncertainty caused by the pandemic have led to a slowdown in the growth rate of UK house prices, with some experts predicting that prices may even fall in the coming years. Additionally, the stamp duty holiday is set to end on March 31, 2023, which will likely lead to a reduction in demand, which could cause prices to fall.

It’s worth noting at this point the often misconceived impression that the elderly are hogging the most significant housing. This has been true and is undoubtedly true today in some instances; however, there is an increasing trend to hand these larger homes over to family or for sale. Younger single people and couples tend to occupy apartments and smaller houses, while families with children tend to occupy larger houses with gardens. Older people, including retirees and empty-nesters, often downsize to smaller properties, such as apartments or bungalows, as they no longer need the space of a larger house and want to reduce maintenance responsibilities.

Many older people live in houses that are too big for them once their children have grown up and moved out. These houses can be challenging to maintain and expensive to heat, and many older people would prefer to live in smaller, more manageable properties. The trend towards older people downsizing has been increasing in recent years, with many older people choosing to sell their large family homes and move to smaller properties, such as apartments or retirement homes. This allows them to release equity from their homes and enjoy a more manageable, low-maintenance lifestyle.

Despite these challenges, the UK housing market remains an attractive investment opportunity for many. With relatively low interest rates and a stable economy, the UK is seen as a haven for investment, which will likely continue to drive demand for property in the future.

Image of a bank for loan to value on a mortgage - Common mistakes when buying a house: Mistake 7 - UK house prices

Current Predictions for UK House Prices

The current predictions for UK house prices vary, with some experts forecasting a slowdown in price growth while others predict a continued increase.

According to the Royal Institution of Chartered Surveyors (RICS), the UK housing market is expected to remain robust in the coming months, with prices continuing to rise. RICS predicts that the UK will see an increase in house prices of around 3% in 2023.

However, other experts have a more cautious outlook, predicting that the end of the government’s stamp duty holiday in March 2023 and ongoing economic uncertainty caused by the COVID-19 pandemic will slow down price growth.

It is also worth noting that some forecasters believe that the ongoing Brexit process may impact the UK housing market, with some experts predicting that it could lead to a fall in UK house prices, particularly in regions that are heavily reliant on exports to the EU.

However, it can always be remembered that there is more demand for housing than supply. Thanks, in large part, to recent government changes in policy towards the taxation of rental income, there is a desperate shortage of rental opportunities too, which has increased demand for ownership. There will always be property movement, not least from those forced to move by birth, death, divorce, marriage, job relocation etc. With insufficient properties being built to meet demand or current government targets, demand will remain higher than supply. I have seen this situation many times over, and prices have fallen, so the aforementioned isn’t a case for increasing prices, just more of a consideration to consider.

Contact Rowallan Exclusive Property Buying Agents for more information.