The price of an average UK home fell by 1.5% in December, according to Halifax.

The typical UK property now costs £281,272, 2% higher than a year earlier, although the rate of growth has slowed sharply over recent months.

The UK’s largest lender said that annual property price inflation slowed in all nations and regions during December, as the cost of living crisis and the fallout from the mini-Budget continues to impact the housing market.

Year of two halves

Halifax pointed out that 2022 was a year of two halves, with very strong house price growth recorded in the first eight months of the year, on the back of a stellar 2021.

The cost of the average home remains greater than it was at the start of 2022 and over 11% more than house prices at the beginning of 2021.

The first half of last year was a very strong period for sellers, said Halifax. Between January 2022 and August 2022, the average cost of a home rose by over £17,000 to £293,992 (growth of 6%), setting a new record high.

Kim Kinnaird, director of Halifax Mortgages, said: “As we’ve seen over the past few months, uncertainties about the extent to which cost of living increases will impact household bills, alongside rising interest rates, is leading to an overall slowing of the market.

“As we enter 2023, the housing market will continue to be impacted by the wider economic environment and, as buyers and sellers remain cautious, we expect there will be a reduction in both supply and demand overall, with house prices forecast to fall around -8% over the course of the year.

“It’s important to recognise that a drop of 8% would mean the cost of the average property returning to April 2021 prices, which still remains significantly above pre-pandemic levels.”

Jason Tebb, chief executive officer of property search website OnTheMarket.com, added: “Our own data shows that sellers expect it to take longer to sell their homes than has been the case in recent months, which ties in with this, although confidence remains remarkably stable.

“As we head into a new year, conditions remain challenging as the cost of living and mortgage rates remain higher than many have become used to. However, people will need to move regardless, with sellers wise to price realistically in order to achieve a successful and timely outcome.”

Regional winners and losers

The North East saw the greatest annual slowdown in growth, with annual house prices rising by +6.5%, compared to +10.5% the prior month. Average house prices in the region are now £169,980.

Eastern England, West Midlands and Wales experienced the smallest falls in growth rate.

Those buying in Scotland will find an average home now costs £200,166, with the second greatest slowdown in the annual growth in the UK, now +3.5% (from +6.4% last month).

Properties in Northern Ireland are up 7.1% year-on-year, with average homes now costing £183,825.

The cost of an average home in London in December was £541,239, a growth of 2.9% annually.