According to Principality Building Society’s Wales House Price Index for Q4 2023, which ranges from October to December, this is the largest year-on-year decline in Welsh house prices since 2009, in the aftermath of the global financial crisis.
Principality Building Society said that there had been four consecutive quarters of price falls since average prices peaked at over £249,000 at the end of 2022.
However, the report said that Welsh house prices were 25 per cent higher than five years ago and the quarterly changes was negative 2.2 per cent.
It noted that the year-on-year decline was “relatively modest in nominal terms” but it was a “more significant adjustment in real terms after adjusting for inflationary pressures”.
Property transactions in Wales down a fifth compared to last year
From a transaction perspective, there were around 9,700 transactions in the fourth quarter, which is down 20 per cent from the same period last year.
The report noted that property transactions in Q4 2022 were 13 per cent lower than in 2021.
Detached property transactions were down 27 per cent in the period, but the report noted that all property types had experienced weaker sales.
“Financial market expectations of lower interest rates through 2024 have prompted better mortgage deals in recent weeks, and it is beginning to feel that the tough period is over with respect to affordability and housing demand. If so, transaction levels may show signs of improvement over the coming quarters,” it added.
Flats report largest price falls
Looking at specific property types, different property types are down by between one to seven per cent when compared to the same period last year.
Flats fell the most from their peak price with a decease of nearly nine per cent from June last year.
The report said that there was “considerable volatility in reported flat prices because of limited sales in many areas” but warned that “not too much ought to be read into the apparent recent pick-up in these prices”.
“The recent and more adverse picture for detached properties may in part reflect the flip side of the strong demand for such properties post-Covid, and the more discretionary nature of purchases of larger properties,” it added.
Majority of Welsh regions report annual house price fall
Cardiff and Caerphilly reported record high prices at £308,648 and £207,904 at the end of the last year but the main trend in 2023 is a “subdued market”.
Year-on-year house price falls were recorded in 18 of the 22 local authorities, and six local authorities reported double digit falls in the same period compared to the previous year.
The six local authorities include Monmouthshire, Carmarthenshire, Blaenau Gwent, Torfaen, Denbighshire and Merthyr Tydfil with the latter falling the most at 21.2 per cent year-on-year.
Wales housing market has ‘some positive signs’
Shaun Middleton (pictured), head of distribution at Principality Building Society, said that the housing market in Wales had been “through a difficult period”.
He continued that the ongoing squeeze on the cost of living and higher mortgage costs meant it was unsurprising that some have “forecast continuing price falls in 2024, followed by a recovery in 2025”.
“However, there are some positive signs including lower inflation and an expectation that the Bank of England rate has now peaked at 5.25 per cent and will fall during 2024. Indeed, financial markets are pricing in several rate cuts, bringing the BoE rate down to four per cent later in the year.
“Mortgage markets have already moved, with lenders cutting rates quite significantly as competition intensifies, and we might expect that to continue,” Middleton added.
He noted that consumer confidence is becoming less negative and surveyor respondents to the latest RICS Wales housing market survey were more positive.
“More instructions are coming into the market and there is a sense that activity will increase, and on the back of that, prices might stabilise. Some analysts for the overall UK market are now suggesting that while the first quarter might still see prices in negative territory, there will be a steady improvement across the year.
“Without doubt, there will be challenges ahead, but the outlook for 2024 is more of an improving view than it was. Potentially, UK government Budget measures (due 6 March 2024) might seek to stimulate market activity which would add further momentum, and of course, housing will loom large in the manifestos being readied for the approaching General Election when it is called. In summary, it is an improving picture for 2024,” Middleton added.
