What Is Going To Happen To UK House Prices?

Read on as we discover what exactly is going on with UK house prices and what this means for you.

October 24, 2023
What Is Going To Happen To UK House Prices?
CompareBanks is reader-supported. When you click through some links on our site, we may earn an affiliate commission. Learn more
Matt Crabtree

Written By

Matt Crabtree


Are you looking to buy a new home but are unsure about the fluctuating property market? Making the decision to invest in property is significant, requiring a substantial outlay of funds and a commitment to long term homeowner loan and unpredictable mortgage rates.

In this article, we will explain everything you need to know about the UK housing market and what this means for you and your next property purchase.

What Is the Average UK House Price?

As of the summer of 2023, the average house price in the UK is £288,000. However, when looking at specific areas of the UK, there are some differences in regional property prices:

  • England — The average house price in England is currently £306,000.
  • Wales — A house in Wales will cost you £213,000 on average at the moment.
  • Scotland — You will pay £189,000 for the average property in Scotland.
  • Northern Ireland — The average price of just £179,000 is relevant to Northern Ireland properties.
England House Prices
Image: Office for National Statistics

Additionally, a first time buyer and a home mover will pay different average property prices. The first time buyer will pay an average of £242,000 for their first home, whereas someone who is selling their home and moving to a new property will pay an average of £341,000.

Why Do Property Prices Differ Across the UK?

Property prices are determined by consumer demand. So, if there is a higher number of consumers who want to buy a property in a certain location, the price of those properties will be higher due to demand.

If fewer consumers want to buy properties in an area, there is less demand so the property prices will be lower. However, what factors entice a consumer to want to buy property in a particular location?

1. Job Opportunities

Areas with greater job opportunities are more popular to live in and invest in, particularly for buy-to-let property owners.

2. Transport Links

If a location has great transport links, the location will be popular for people moving to the area as well as for investors.

3. Regeneration

Areas that are undergoing regeneration and significant development will experience higher property prices as they become a more desirable location to live.

4. Attractions

Locations that attract tourists with their culture and attractions will increase the prices of property. For example, locations such as London, Oxford and Cambridge will always experience high property prices due to their popularity and notoriety across the world.

Why Have House Prices Increased in the UK?

The average house price in July 2019 across the UK as a whole was £232,618, rising to an all time high of £292,674 in November 2022. This shows a significant increase of around £60,000 against the average UK house price across 40 months. But, what has caused such a sharp incline?

Stamp Duty Cut

The Government offered a reduced stamp duty rate for 12 months during 2020 and 2021. This meant that properties up to a value of £500,000 did not have to pay any stamp duty, even if you were moving home. 

The current stamp duty rate is 3% of the property value up to £500,000, unless you are a first time buyer. So, this stamp duty cut saved many people a lot of money.

As a result, the stamp duty cut incentivised many individuals in the UK, persuading numerous property purchases. This increase of demand affected the increase in property prices and has also meant that homebuyers can pay a higher deposit to buy a house.

Low-Interest Rates

When interest rates are low, getting a mortgage seems like a good decision to make. Your mortgage repayments are low so you pay less interest on the mortgage loan. This is also a reason why investors invest their money into property.

The Bank of England base rate affects the interest rates offered by lenders when taking out a mortgage and can be increased or decreased to tackle inflation.

The base rate remained below 1% from March 2009 until March 2022, resulting in lower mortgage rates offered to the consumer. This is attractive to both buyers and to vendors, increasing both supply and demand across the UK property market.

The Bank of England raised the base rate to 1% in May 2022 and it has been increasing regularly over the past 18 months. As of October 2023, the UK base rate is currently 5.25%

As a result, a trickle-down impact on the property market is seen as lenders have increased their interest rates and deterred some potential homebuyers, reducing demand and stalling the surge in property prices.

Bank Lending

The most significant impact on the housing market is the amount of lending conducted by the banks. The more money banks lend to consumers, the greater the demand for properties and debt. 

However, a higher bank rate and higher mortgage interest rates should mean that banks will lend less in the short term, reducing demand and reducing prices. Although this may be a temporary change.

Supply Constraints

When houses in the UK are in short supply, there is greater demand for the existing housing stock. As a result, the property prices of the existing stock increases and the UK experiences high property prices.

During the Covid-19 pandemic, house building slumped with the construction industry experiencing a drop in output. Although an increase in current house building will increase supply and could help the demand.

Have UK Property Prices Started to Fall?

Measuring the November 2022 average house price of £292,674 against today’s average of £288,000, a noticeable decline has occurred of around £5,000. 

The main factor that has resulted in a property price decline is the increase in the Bank of England’s base rate. This has increased the cost of mortgages to the consumer and deterred many consumers from taking the plunge and buying a property. Demand has, therefore, plummeted and banks are lending less money to consumers.

What Will Happen to Future UK Property Prices?

The forecasted property prices experienced across the UK are greatly impacted by the Bank of England base rate. So, what is likely to happen to the base rate over the next few years?

The UK Base Rate

Experts are suggesting that the current base rate of 5.5% is the highest the UK will experience in the foreseeable future. This base rate peak is supported by the recent refusal by the Bank of England’s Monetary Policy Committee to raise the base rate in September 2023, keeping the 5.25% base rate stable.

Forecasts for the base rate suggest that a 5.25% base rate will remain constant during the majority of 2024, offering a steady decrease towards the end of 2024 and throughout 2025 and 2026.

Bank of England Base Rate Forecast Graph
What Is Going To Happen To UK House Prices? 1

Image: This Is Money

Forecasts beyond these dates suggest it is too early to decide what the base rate will settle at and whether the UK will ever experience a low base rate under 1% again. However, the predicted steady decline is a positive sign for the UK economy and for all UK consumers who want to buy a property or remortgage their home.

The UK Property Market

So, if the Bank of England base rate is predicted to retain stability at its current level and then gradually decline, what does this mean for property prices and the UK property market?

A higher base rate means higher interest rates, meaning that it costs you more money each month in interest on mortgage repayments. In addition to a higher cost of living, many people in the UK are holding off from purchasing a property or moving home at the moment.

These factors are starting to result in a decline in property prices across the UK, with experts predicting a fall of 12% in UK property prices from the UK peak. 

A decrease of 12% from the peak of £292,674 in November 2022 would mean that the average property price is forecasted to drop to £257,553 by the end of 2-24, a decline of £35,121.

Whilst a decrease in UK property prices is good for the homebuyer and the economy as a whole, an average price of £257,553 is still high in contrast to July 2019’s average price of £232,618.

Should I Buy a Property in 2023?

Whether you should buy a property in 2023 will depend entirely on your circumstances. If you already own a property, then it is best not to sell and buy a new property yet. You will pay higher interest rates and could purchase a house at a price that will decline in the near future. 

You could receive a better deal on a mortgage towards the end of 2024 and into 2025, so it could be best to wait until then to buy a home or move home. Try not wait too long, however, as property prices may rise again after 2025.

Optimised House Prices
Image: BBC

However, if you are currently renting your home, you are probably witnessing increases in how much rent you pay each month. Your buy-to-let landlord will be paying higher interest rates if they have a mortgage on the property and they will relay that increase back to the tenants where possible.

In this situation, you could find that buying your own home will cost you the same amount each month in comparison to your new rental cost. So, if you can afford to do so, buying a property now might be the best decision for you.

UK House Prices: Final Thoughts

The UK property market has always been tumultuous. In October 1993, UK average house prices remained at £54,026, a stark difference to the average £288,000 currently witnessed by the consumer.

However, house price growth is starting to fall to make it slightly cheaper to buy a property in the UK over the next few years. Of course, this is not great news if you are selling your home as you will receive a lower price.

Related Articles

What's going on at Metro Bank?
What's going on at Metro Bank?
It launched in 2010 to much fanfare with vibrant bank branches and a “chief canine...
November 30, 2023
How The Latest UK Tax Cuts Impact You
How The Latest UK Tax Cuts Impact You
After weeks of speculation on what the UK chancellor Jeremy Hunt was going to announce...
November 27, 2023
UK bank closures: Who's shutting the most branches?
UK bank closures: Who's shutting the most branches?
Across the UK, once-bustling high streets are pockmarked with closed ba...
November 21, 2023
Is Crypto Dead? The Fallout from the Collapse of FTX
Is Crypto Dead? The Fallout from the Collapse of FTX
Crypto darling FTX has collapsed and enigmatic founder Sam Bankman-Fried is facing...
November 21, 2023