According to the latest figures from the Office for National Statistics (ONS), the house price fall is up from a decrease of 2.4 per cent in the 12 months to November.
The report continued that the average UK house price was £4,000 lower than it was a year ago.
The ONS said that, on a seasonally adjusted basis, the average UK house price grew by 0.3 per cent in December 2023, following a month-on-month decrease of 0.7 per cent in November 2023.
On a non-seasonally adjusted basis, the average UK house price rose by 0.1 per cent in December 2023, coming after a month-on-month decrease of 1.1 per cent in November 2023.
From a regional perspective, house prices in the 12 months to December 2023 decreased in England to £302,000, equal to a 2.1 per cent fall, and in Wales, house prices have contracted by 2.5 per cent to £214,000. However, in Scotland, house prices have gone up by 3.3 per cent to £190,000.
Average house prices in Northern Ireland also rose, going up by 1.4 per cent over the period to £178,000.
London remains the most expensive region in the UK, with the average house price coming to £508,000 in December 2023, but it reported the lowest annual house price inflation at negative 4.8 per cent in the period.
The North East has the lowest average house price of all regions at £158,00 in December, and had the highest annual house price inflation, with average prices rising by 1.2 per cent.
House price outlook is ‘brighter’ but strong market recovery will take time
Chris Little, chief revenue officer at Finova, said that the “slight lag” in today’s figures reflected “higher borrowing costs” and “weaker demand” toward the second half of 2023.
“Although many buyers naturally put their purchase plans on hold due to these financial constraints, the outlook for the new year is much brighter. It may still be some time before we witness a strong market recovery, but thanks to stabilising swap rates and lower inflation, there is certainly the expectation that a more even balance between supply and demand will drive activity well into 2024.
“The mortgage ‘price war’ is already heightening the level of competition between lenders, who will be battling to both retain and win new business in the coming months,” he noted.
Little continued that, as competition intensified and borrowers resumed their purchase plans, lenders would be “leaning on technology to facilitate both a smooth and efficient property transaction for their customers”.
“Whether that’s investing in a new pricing engine to respond to market changes at pace, and offering personalised rates, or migrating to a new banking platform to self-serve product changes, lenders must invest in these tools early on to stay on top of their game,” he added.
Propertymark CEO Nathan Emerson agreed that the drop was not surprising, as economic volatility would normally lead to a drop in house prices, since “people cannot afford homes in the same way they can during a period of economic growth”.
“This drop will ease the pressure placed on people’s affordability and help them move home or step onto the property ladder,” he said.
2024 could be ‘more positive’ for landlords
Emma Cox, managing director of real estate at Shawbrook, said that 2024 was looking “more positive, with a reduction in mortgage rates fuelling activity at the start of the new year”.
“Landlords should take note of the continuing trend among professional property investors in 2024, as they strategically diversify their portfolios to spread risk and shield themselves from challenging markets. This presents an opportune moment for professional investors to assess and review their portfolios and the potential benefits of diversification. We’re seeing a strong demand for commercial finance products.
“Despite market challenges, there remains an overall sense of optimism. The combination of falling mortgage interest rates and a buyers’ market is encouraging landlords to seize opportunities and expand their portfolios,” she added.
