Key points –

1. Coastal areas and those with good transport links to major cities have seen a notable increase in property values in 2023, with East Lothian leading at a 10.3% rise.
2. While most UK regions have experienced a decline in house prices, Kensington and Chelsea, and the City of Aberdeen, have faced the most significant drops, at 10% and 6.1%, respectively.
3. The increase in mortgage interest rates has been a major factor influencing the housing market, causing many buyers to delay purchases and sellers to accept lower offers.
4. Prospects for 2024 suggest a potential recovery in the housing market, driven by decreasing mortgage rates and the anticipation of a reduction in the Base Rate.
5. Despite the current fluctuations, the persistent shortage of housing in the UK indicates that significant price falls are unlikely in the coming year.

A trend has emerged in 2023: areas close to the coast or with excellent transport links to major cities have seen a strong increase in property values. This shift reflects the growing appeal of seaside living and the convenience of commuting, a trend accelerated by the pandemic’s impact on remote work.

House Price Top Performers of 2023

• East Lothian: This picturesque region tops the list with an impressive 10.3% rise in average house prices, reaching £323,730.
• Fylde & Rutland: These areas follow closely, with increases of 7.7% and 7.6%, respectively.
• Notable Mentions: Other areas like Amber Valley, Telford and Wrekin, and Harborough have also experienced significant growth, with increases ranging from 6.9% to 7.2%.

The Urban Appeal

Urban areas haven’t been left behind. Cities like Nottingham and Rochdale have seen their average house prices jump by over 6%, illustrating the continued allure of city living.

The High-End Spectrum

Even the City of London, known for its luxury properties, has seen a 6.4% increase, with average prices now exceeding £900,000.

Regions with Declining Prices

While most of the UK has experienced a drop in house prices, a few areas have seen particularly notable declines:

• Kensington and Chelsea: This high-end borough has witnessed a dramatic 10% decrease, translating to a staggering £148,000 drop in average property values.
• City of Aberdeen: Here, house prices have fallen by 6.1%, a significant figure for the region.

Other areas like Gwynedd, West Dunbartonshire, and Islington have seen more modest declines, ranging from 1.1% to 1.4%.

The Mortgage Rate Impact

A key factor in the housing market’s dynamics this year has been the rise in mortgage interest rates. As rates increased, many prospective buyers chose to delay their purchasing plans, leading to a decrease in demand and, consequently, prices.

The Seller’s Conundrum

Sellers have faced challenges, too, often accepting offers well below the asking price. Reports indicate that vendors are now settling for an average of 5.5% less, equating to an £18,000 reduction.

The Potential for Recovery

There’s a glimmer of hope for the housing market in 2024. With mortgage rates starting to decrease, buyer interest may reignite. This trend could either lead to a resurgence in house prices or at least mitigate further declines.

The Base Rate and Swap Rates

The future of house prices is closely tied to the Base Rate and swap rates. With indications that the Base Rate might have peaked and could potentially decrease in the latter half of 2024, mortgage deals are becoming more attractive, paving the way for increased buying activity.

Despite the fluctuations, the persistent shortage of housing in the UK suggests that significant price falls are unlikely in the coming year.

A Mixed Bag with a Silver Lining

The 2023 housing market in the UK has been a tale of contrasting fortunes. While some regions have celebrated growth, others have faced declines. However, with mortgage rates potentially easing and a continuous demand for housing, 2024 might offer more stability and opportunities for both buyers and sellers in this complex market.