Our House Price Index, which measures the rise and fall of house prices across the UK, has tracked a -1.2% fall in house prices since this time last year.
The average UK house price is now £264,600. That’s £2,910 lower than a year ago and £300 lower than last month.
The last three months are the only times we’ve registered annual house price falls in the last decade. House prices fell -0.5% in the year to September and -1.1% in the year to October.
Higher mortgage rates have reduced interest in buying a home while many people are trying to sell their home in recent months. This is limiting sale numbers and causing property prices to fall as people try to attract buyers
Where are UK house prices falling in October 2023?
If you live in England or Wales, it’s now likely that your house price is lower than last year, regardless of what type of property you have.
Homeowners in Southern England are seeing the biggest fall in house prices. The East of England (-2.6%), the South East (-2.4%) and London (-2.0%) are the worst hit.
On the other hand, property prices are now +1.9% and +1% higher than a year ago in Northern Ireland and Scotland respectively.
Lower average house prices here means many people can still afford to buy a home with a higher mortgage interest rate. This keeps the housing market moving and means there’s less need for sellers to reduce their prices.
Cities in the South of England are seeing the biggest house price falls. Bournemouth is the city where house prices are falling the most, with prices -2.6% lower than last year.
House prices have fallen -2.3% in Southampton and Cambridge while London and Portsmouth are down -2.0%, along with Leicester in the East Midlands.
These housing markets had strong buyer demand and huge price growth during the pandemic. But now demand is falling and supply is growing, there is downward pressure on local property prices.
On the other hand, house prices are still rising slowly in a few cities in Scotland, Northern Ireland and the North of England. This includes Belfast (+2.3%), Glasgow (+1.1%), Edinburgh (+0.8%) and Newcastle (+0.6%).
|City||Annual house price change (%)||Average house price|
Local authority areas
When you analyse house prices on a local scale, the price falls get bigger.
But now, demand is falling and supply is growing in the south due to higher mortgage rates, putting the negotiating power in buyers’ hands.
|Area and county||Annual house price change (%)||Average house price|
Why are UK house prices falling?
Higher interest rates on mortgages have made it harder for people to buy a home.
This means buyer demand is -13% lower than in 2019. That was the last time the market was in a fairly similar situation - before the Covid-19 boom of 2020-22 and the mini-budget last autumn.
At the same time, there are many more homes on the market than in recent years. In fact, supply of homes for sale is at a 6-year high.
These factors together create a buyers’ market - when buyers have more choice so sellers are under pressure to reduce their prices.
This has caused the average discount to asking price to reach a 5-year high of 5.5% or £18,000 on average.
In turn, sold house prices have fallen -1.2% - but many expected bigger price falls by now.
Mortgage affordability testing in recent years means the market is more resilient than in previous years, such as after the financial crisis of 2008.
The chart shows how price falls are happening across many different price bands an
d locations of the UK.
Will house prices keep falling in 2024?
Yes, our data suggests that house prices will keep falling next year.
After three years of strong price growth up until 2022, higher mortgage rates are resetting the price people can afford to buy at.
Mortgage rates - which have been lower than 5% lately for 5-year fixes - need to drop further to improve affordability and encourage people to move.
Rising wages and falling property prices are helping with affordability, but they’re not enough to offset the higher mortgage rates yet.
How far house prices will fall hinges on the trajectory for mortgage rates and how mortgage lenders assess affordability. Some economists forecast that the Bank of England will start cutting rates around summer 2024. This would see mortgage rates falling and mean an uplift in housing market activity towards the end of next year.
Our House Price Index for November 2023 uses sold prices, mortgage valuations and data for agreed sales up to October 2023. It uses more data than any other to accurately track house prices and housing market trends in the UK.