Property prices in the UK rose for the third consecutive month in December 2023, according to the latest Halifax HPI data.

The cost of an average UK home rose to £287,105, up £3,066 (+1.1%) from November, reaching the highest level since March 2023.

According to Halifax, this means the housing market beat expectations in 2023 and grew by 1.7% on an annual basis. 

The average property price is now £4,800 higher than it was in December 2022. 

Kim Kinnaird, director for Halifax Mortgages, said: “Whilst it’s encouraging that we saw growth in the last three months of the year, this was preceded with property price falls for six consecutive months between April and September. 

“The growth we have seen is likely being driven by a shortage of properties on the market, rather than the strength of buyer demand. That said, with mortgage rates continuing to ease, we may see an increase in confidence from buyers over the coming months.”

Across all the UK regions, Northern Ireland recorded the strongest house price growth in 2023, with properties increasing by 4.1% to £192,153. Scotland saw property prices rise by 2.6% to £205,170. 

At the other end of the scale, the South East fell most sharply, with houses there now averaging £376,804, down by £17,755 (-4.5%).

Kinnaird said: “As we move through 2024, the UK property market will continue to reflect the wider economic uncertainty and buyers and sellers are likely to be naturally cautious when considering making a move. 

“While wage growth is now above inflation, helping to ease cost of living pressures for some and improving housing affordability, interest rates are likely to remain elevated for as long as inflation remains markedly above the Bank of England’s target. 

“Our latest forecast suggests house prices could fall between 2% and 4% during the coming year, although, as with recent years, forecast uncertainty remains high given the current economic climate.”

More reaction

Anthony Codling, managing director, equity research, RBC Capital Markets, said: “The demise of the UK housing market is somewhat over reported. Most, including us, thought house prices would fall during 2023, and most think they will fall in 2024, but not us. 

“With rising wages, falling inflation, falling mortgage rates, and increasing talk of election-related housing stimulus packages, we expect house prices to rise in 2024. Our pessimism was misplaced in 2023, and we don’t want to make the same mistake twice.”

Guy Gittins, Foxtons CEO, said: “The latest figures provide further proof that despite a tough year, the UK property market has seen 2023 out on the front foot, recording a third consecutive monthly increase in the rate of house price growth and finishing the year with positive annual growth.

“This growing positivity has no doubt been bolstered by the resulting stability of a freeze on interest rates and the market is now poised for what we expect to be a much better year.”

Tom Bill, head of UK residential research at Knight Frank, said: “Annual house price growth has returned to positive territory as the economic convulsions of the last 18 months dissipate. The landscape changed at the end of last year as inflation dropped below 4%, which has put marked downwards pressure on mortgage rates and means housing transactions will keep rising from a low base. 

“There is likely to be a seasonal bounce in activity this spring, particularly after the prime minister hinted this week that the election will happen in the second half of 2024.”

Jonathan Samuels, CEO of Octane Capital, said: “A freeze on interest rates has certainly helped to steady the ship and not only have we seen mortgage approvals start to climb, but house prices are now starting to follow suit. 

“With the base rate remaining at its highest since 2008, we’re not yet out of the woods, but we can now see the light through the trees and it’s difficult to anticipate anything other than further positivity on the horizon in 2024.”