Annual house price inflation turns negative

Published 7th of June, 2023

The Halifax published its House Price Index for May 2023 this morning

What the Halifax said

Average house price £286,532

House prices decreased by £130 or 0.0% in May

Annual house price inflation turns negative, for the first time since December 2012


Twindig Take

Is the house price party finally over? The Halifax House Price Index for May 2023 revealed the first annual decline in house prices since December 2012. Average house prices are now £3,009 lower (1.0%) than they were in May 2022.

According to the Halifax house prices, on average are now £7,460 lower than their August 2022 peak of £293,992.   

As inflation remains stubbornly high it is likely that the Bank of England will raise Bank Rate again as it continues to try to tame inflation through interest rate rises. As a result of these heightened interest rate expectations, lenders have been both reducing the number of mortgage products they sell and increasing the mortgage rates on those that remain. 

In our view, the impact of these mortgage rate rises is three-fold:

Homebuyers' mortgage capacity has been reduced, lenders will offer them smaller mortgages today than yesterday, putting downward pressure on house prices

Housing transactions are likely to continue to reduce as homebuyers and home sellers take stock of the changing mortgage market conditions

Cash buyers will be in a stronger position in the summer than they were in the spring.

What will happen next?

Our belief is that the housing market will be subdued over the summer whilst we wait for the dust to settle on the trajectory and level of mortgage rates and as households prepare for and enjoy their summer holidays. Many aspirational movers will step back from the market and only those that either really need to move or those not impacted by the mortgage market malaise will push to complete their home purchases or sales. 

We continue to believe that housing transactions will fall further than house prices. In previous major housing market downturns housing transaction levels have fallen by around 50% and whilst house prices peak to trough falls have been in the region of 10-20%.  According to the Halifax, house prices are 2.5% below their August peak and we are sticking to our forecast of house prices falling by 8-10% this year. 

Housing Hailey

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