Halifax has predicted an 8% fall in property prices in 2023.

The UK’s largest lender said that such a fall would place the average property price back at roughly the level it was in April 2021, reversing only some of the gains made during the pandemic.

It added that the forecast was uncertain and could be affected by Base Rate changes and rising unemployment.

2022 in review

Halifax said that 2022 was a year of two halves. The housing market remained buoyant in the first half of the year, ‘as pandemic-driven shifts in housing preferences and low interest rates kept transaction demand elevated’.

But it noted that house prices began to flatten from the middle of the year before falling towards the end of 2022. This was down to the increased cost of living putting more pressure on household finances and rising interest rates pushing up mortgage costs.

The average UK house price is now £285,579 compared to £272,778 a year ago, a rise of £12,801, said the lender. It added that the typical UK house price has increased by 71% over the last decade (£166,627 in November 2012), a rise of £118,953.

Andrew Asaam, homes director at Halifax, said: “The year kicked off with average house prices continuing to rise at pace, still supported by low interest rates and strong demand from buyers. This meant the typical property had added more than £17,500 to its value by June.

“Following such rapid house price growth, and the growing economic headwinds, a slowdown was almost inevitable.

“As the increasing cost of living puts more pressure on household finances and rising interest rates impact customers’ monthly mortgage payments, there’s understandably now more caution among both buyers and sellers – particularly following recent market volatility – which has seen demand soften as people take stock.

“Looking ahead to next year, it will clearly be a more challenging economic environment and the housing market will continue to rebalance to reflect these new norms.”