House prices in the UK fell by -1.8% over the course of 2023, with Scotland and Northern Ireland being the only regions to record house price growth in the 12 months to the end of December, Nationwide has found.

Its house price index (HPI) revealed that the average house price in the UK at the end of 2023 stood at £257,443.

This decline in house prices also represents an almost -4.5% drop from the all-time price high recorded in late Summer 2022.

However, after taking into seasonal affects, Nationwide has said that house prices remained flat in December compared to November.

Chief economist at Nationwide, Robert Gardner, said: "Housing market activity was weak throughout 2023. The total number of transactions has been running at c.10% below pre-pandemic levels over the past six months, with those involving a mortgage down even more (c.20%), reflecting the impact of higher borrowing costs. On the flip side, the volume of cash transactions has continued to run above pre-Covid levels.

"Even though house prices are modestly lower and incomes have been rising strongly, at least in cash terms, this hasn’t been enough to offset the impact of higher mortgage rates, which in recent months were still more than three times the record lows prevailing in 2021 in the wake of the pandemic.

"As a result, housing affordability has remained stretched. A borrower earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 38% of take-home pay – well above the long run average of 30%."

Over the course of 2023, Scotland and Northern Ireland were the only regions to record increases in house prices, rising by 0.5% and 4.5% respectively.

Overall, England and Wales recorded price drops of -2.9% and 1.9% respectively during 2023.

The HPI revealed that East Anglia was the weakest performing region in the past 12 months, with prices falling by -5.2% compared to Q4 2022.

Northern England, which comprises the North, North West, Yorkshire and the Humber, East Midlands and West Midlands, saw prices collectively fall by -1.8%. Out of these regions, Yorkshire and the Humber performed the best, with an annual rate of change of -0.5%.

In Southern England, which includes the South West, Outer South East, Outer Metropolitan, London and East Anglia, house prices fell by -3.4% year-on-year. London was once again the best performing region, with an annual decline of -2.4%.

Looking forward into 2024, Gardner added: "There have been some encouraging signs for potential buyers recently, with mortgage rates edging down. Investors have become more optimistic that the Bank of England has already raised rates far enough to return inflation to target and will reduce rates in the years ahead. This shift in view is important, as it has brought down longer-term interest rates, which underpin fixed mortgage rate pricing.

"Nevertheless, a rapid rebound in activity or house prices in 2024 appears unlikely. While cost-of-living pressures are easing, with the rate of inflation now running below the rate of average wage growth, consumer confidence remains weak and surveyors continue to report subdued levels of new buyer enquiries.

"Moreover, while markets are projecting that the next bank rate move will be down, there are still upward risks to interest rates. Inflation is declining, but measures of domestic price pressures remain far too high."

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