UK house prices increased by 7.2% over the course of 2022, according to the final Zoopla House Price Index of the year.

Zoopla stated that the sharp drop in demand for housing since the summer has rapidly reversed the upward momentum in house prices. The 7.2% year-on-year rise to December is equal to an increase of £17,500.

The index also revealed that the underlying rate of quarterly price inflation has slowed quickly, from over 2% up until the summer to just 0.3% in the last three months - an annualised growth rate of just 1.4%. Zoopla said it expects its index to register quarterly price falls over the first half of 2023, dragging the annual rate negative by the middle of the year.

This is the same pattern across all regions and countries of the UK as weaker demand from higher mortgage rates, cost of living pressures and low consumer confidence has impacted price growth across all markets. Zoopla also said that sellers are continuing to accept larger discounts to asking prices to achieve sales.

Zoopla executive director - research, Richard Donnell, said: “The dynamics that have shaped the housing market over the last five years are shifting. We expect affordable urban centres to fare better than average in 2023 but the inner London market may require another year before it is ready to rebound.”

Furthermore, Zoopla stated that affordability is the primary factor looking ahead to 2023 and beyond influenced by mortgage rates, household incomes and the actual level of house prices.

The property expert said that the more unaffordable a market, the more households are priced out, weakening demand and impacting sales volumes and pricing.

Commenting on the group’s latest data, senior pensions and retirement analyst at Hargreaves Lansdown, Helen Morrissey, added: “House price growth has been pretty robust over the whole of 2022 but this hides the horror show of the past few months with demand rapidly on the slide - we face the very real prospect of quarterly price falls in the near future.

“The cost of living crisis is biting down hard on our finances and rising mortgage rates have put off all but the most determined of buyers. Added to this, the prospect of a looming recession is enough to make many people delay a house purchase for the foreseeable future. We’ve also seen the end of the pandemic fuelled race for space with demand in rural and coastal areas tailing off.

“The sense of nervousness is palpable as we head into the new year as people wait for signs of house price falls before making their move.”

Share Story: