The average residential property price in the UK dropped by 1.2% year-on-year in October to £287,782, the latest government data has revealed.

The Office for National Statistics (ONS) house price index showed this was a sharper annual decline than the 0.1% drop recorded in September, which was also the first yearly fall seen in more than a decade.

On a monthly basis, average house prices depreciated by 0.7%.

UK house prices were £3,000 lower than a year ago in October, but £7,000 higher than a recent low recorded in March this year.

Industry reactions:

Tom Bill, head of UK residential research at Knight Frank, said: “Downwards pressure on mortgage rates has increased after inflation fell faster than expected today, which means the property market should see a seasonal pick-up in transactions next spring in a way that didn’t happen this autumn. A strong jobs market, the availability of longer mortgages, the fact more homes are owned outright than with a mortgage and the absence of forced selling due to tighter mortgage stress-testing rules since the global financial crisis have all helped avoid steeper price declines. Next year’s general election has become the biggest uncertainty facing the market but the worst of the economic news increasingly feels behind us.”

 

Verona Frankish, CEO of Yopa, commented: “While we’ll be glad to see the back of what has proved a testing year for the UK property market, it’s a year that, at least, looks to be finishing on a positive note with market activity starting to build.

“The market has been stabilising since the first decision to hold interest rates and last week’s decision to do so for the third consecutive time will only help build market momentum ahead of the new year.

“2024 already looks to be a far more promising one, with stability returning and the hope of an interest rate reduction also likely to bring buyers back into the fold.”

 

Nathan Emerson, CEO of Propertymark, said: “Throughout 2023 higher interest rates have affected mortgage affordability, which has been a contributing reason why prices dropped in the 12 months to October. Propertymark’s latest Housing Insight Report found that there has been a 13 per cent decrease in the number of potential homebuyers registered at each member branch. Though the Bank of England has said it has no intention to raise interest rates for now by keeping them at 5.25 per cent, the UK Government should further focus on the task of slashing inflation to meet the Bank of England’s target of 2 per cent. Interest rates will likely fall in the long-term, thereby reducing borrowing costs for homeowners, and we should finally see market confidence return to what is was prior to Covid-19.”

 

Anthony Codling, MD at RBC Capital Markets, commented: “The fact that average UK house prices in October 2023 have only fallen by £3,000 or 1.2% in one year is testament to just how robust the UK housing market is. In the aftermath of last year’s mini budget few, if any, commentators were suggesting a fall of just £3,000 in the coming year. The housing market is still challenging, but with inflation falling, the prospect of Bank Rate (and therefore mortgage rate cuts) edges ever closer. During 2023 the temperature of the UK housing market has been frosty, but the early indications are that in 2024 the housing market may start to warm up.”

 

Nick Leeming, chairman of Jackson-Stops, said: “Despite house prices easing month-on-month, the market should take some comfort in the challenges it has navigated in the past year. If we look back to October 2022, the Bank of England were on the cusp of raising the base rate to 3%, while the average UK house price was £291,000. Fast forward 12 months and the base rate is now 5.25% and the average house price is £288,000. With many having predicted house prices would fall 5% across the year, a minimal drop of just 1% is the clearest example of the property markets enduring strength despite riding the real estate rollercoaster.

“Looking ahead, predicting the market is like trying to read a ‘Mortgage Mosaic’ – a picture made of many different, tiny pieces, often driven by regional and economic nuance. Some may foresee a ‘Garden of Growth’, others, a ‘Desert of Decline’. The truth? Probably a mix, a ‘Patchwork of Plateaus’ where some areas see growth while others experience a continued cooldown.

“What we expect to see is a minor reduction in property values overall next year, but no great dips as we have seen from 2023 the strength that underpins our bricks and mortar. Some house prices will be back in line with pre-pandemic levels, allowing for a fairer playing field for both buyers and sellers. With the prospect of interest rates going down next year and a greater pipeline of supply emerging in the spring, there is reason to expect a stronger market as the year progresses.

“However, the tides of 2024 will now definitely have to ride out a General Election, which could be as early as May. This may prompt more buyers and sellers to sit and wait, with pre-election uncertainty often impacting domestic economic confidence. It is important that throughout the year, sellers continue to accept realistic valuations, reflecting a market that has greater competition once again.

“Overall, in the grand tapestry of the housing market, it is the diverse threads of lifestyle choices and circumstances that keep the wheels of the market in motion, likely to create a steady stream of transactions throughout 2024, akin to levels seen in pre-2020.”

 

Nicky Stevenson, MD at Fine & Country, remarked: “House prices fell in October, with sellers more realistic about pricing than they were at the start of the year and accepting lower offers.

“However, after a bumpy start to 2023, the property market is looking increasingly buoyant, and today’s steeper than expected drop in inflation is likely to drive greater activity in the early part of next year.

“The fact that the housing market has remained robust despite the year’s economic challenges gives reason to be positive about its continued resilience and growth.

“Buyers are proving highly motivated to move, with some having put their plans on hold while waiting for the economic landscape to stabilise. Good quality homes in sought-after locations are still being snapped up quickly as a result.

“Properties marketed at first-time buyers should become an easier sell in the new year as mortgage providers continue to compete for business and are bringing interest rates down in the process, widening affordability and the potential pool of movers.”

 

Jason Tebb, CEO of OnTheMarket, commented: “This data is a little historic but shows a slight dip in prices in October, with the average property price £3,000 lower than a year ago but £7,000 above the recent low point in March 2023.

“Three pauses in interest rate rises has had a positive knock-on effect on confidence, which the market relies on. The welcome news that inflation has dropped again will reinforce market stability, further cementing expectations that base rate has peaked and the next move will be downwards.

“Affordability remains a challenge but the market continues to tick along, with focused buyers welcoming further mortgage reductions from lenders. Pricing sensitively is crucial and sellers who take advice from a local agent will still find plenty of opportunity to successfully transact in the new year.”

 

Iain McKenzie, CEO of The Guild of Property Professionals, said: “Another fall in property prices makes it even more likely that 2023 will finish with the average price paid for a home ending up less than the year before – the first time we have seen this in over a decade.

“Stability is on the horizon though, with different measurements for house prices indicating a tapering off in house price volatility.

“This is good news for homeowners, who have faced uncertainty all year about the value of their property and when the best time to sell is.

“First-time buyers will have been hoping for a greater adjustment in prices than just a £3,000 fall in the previous 12 months, as that does not put levels anywhere close to what the picture was like pre-pandemic.

“An important factor to bear in mind is that we have not seen as much of a drop-off in property transactions as there has been in other periods of economic difficulty. This demand has kept prices from facing a landslide in the last year.

“It is likely that the coming months will continue the trend of modest falls, but with inflation coming down at a faster rate than expected, we are hopeful that this will eventually bring more confidence back to the market, and more lenders will loosen the purse strings.”

 

Jonathan Hopper, CEO of Garrington Property Finders, commented: “It’s far from the plunge that some were predicting at this time last year, but months of price reductions on the property front line have finally fed through into the official data.

“Even though some of the forward-looking house price indices already suggest asking prices are starting to rise again, the lag in the way the ONS collects its data means it’s likely to show further falls in coming months.

“As a result, 2023 is firmly on course to be the first year in more than a decade to see a fall in the average price paid for a home.

“While the worst of the price correction is probably behind us, things aren’t back to normal yet. The market is still slow, and the number of homes changing hands in October was down over a fifth compared to the same month last year.

“Nevertheless the early signs for 2024 are encouraging. Softening interest rates, coupled with the sense that prices have bottomed out, are bringing would-be buyers out of the woodwork.

“As consumer inflation cools, buyers’ disposable income is rising again – and with the supply of homes for sale slowly starting to improve, things should become more free-flowing in time for the traditional ‘New Year, new home’ uptick in activity.

“While there’s unlikely to be a clear cork-popping moment, average property prices for the UK as a whole should pick up gradually in 2024, by 1% or 2% during the course of the year.

“But the recovery will be far from universal, and it could easily be derailed if interest rates fail to ease further or if there is an unexpected and disruptive event like a snap general election in spring.”