House prices slip for fourth month in a row

The reversal in house prices continues the trend that began in September, but Nationwide believe that a soft landing is still the most likely outcome.

The average price of a property fell by 0.1% in December, lower than the the previous two months, leaving prices 2.5% below their August peak. The annual increase of 2.8% is the lowest since July 2020.

Nationwide's figures for December

.

December 2022

November 2022

Monthly change

-0.1%

-1.4%

Annual change

+2.8%

+4.4%

Average price

£262,068

£263,788

Robert Gardner, chief economist, Nationwide -

"While financial market conditions have settled, mortgage rates are taking longer to normalise and activity in the housing market has shown few signs of recovery.

"It will be hard for the market to regain much momentum in the near term as economic headwinds strengthen, with real earnings set to fall further and the labour market widely projected to weaken as the economy shrinks.

"The recent weakness in mortgage applications may, in part, represent an early seasonal slowdown. With the chaotic backdrop and elevated mortgage rates in recent months, it wouldn't be surprising if potential buyers have opted to wait until the New Year to see how mortgage rates evolve before deciding to step into the market.

"Longer term interest rates, which underpin mortgage pricing, have returned towards the levels which prevailed before the mini-budget. If sustained, this should feed through to mortgage rates and help improve the affordability position for potential buyers, as will solid rates of income growth (with wage growth currently running at a c.7% pace in the private sector), especially if combined with weak or negative house price growth.

"But the main factor which would help achieve a relatively soft landing (especially for house prices) is if forced selling can be avoided, and there are good reasons to be optimistic on that front. Most forecasters expect the unemployment rate to rise towards 5% in the years ahead - a significant increase, but this would still be low by historic standards."