January 30

15-Year Low: Lender Reports Severe House Price Decline


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As 2023 drew to a close, the average home price in Wales experienced a decline, settling at £234,086. This marks the fourth consecutive quarter of reduced prices, attributing the downturn to persistent economic and financial pressures impacting the region.

The statistical insights come from the Q4 2023 report of Principality Building Society’s Wales House Price Index. This comprehensive index provides a detailed overview of the fluctuations in house prices across the 22 local authorities in Wales, shedding light on the dynamics influencing the real estate market in the region.

Wales is witnessing a significant downturn in house prices, experiencing a noteworthy six percent decrease, equivalent to an average drop of £15,000 when compared to the peak price of £249,076 recorded in the previous year. This decline represents the most substantial year-on-year decrease in the average house price in Wales since the aftermath of the Global Financial Crisis in 2009.

However, it’s essential to contextualize this downturn by highlighting that despite the recent decline, current house prices in Wales are still 25 percent higher than they were five years ago. This indicates that while there has been a notable dip, the overall trajectory of the housing market over the past half-decade has seen considerable growth. When assessing the quarter-on-quarter comparison, the fall in house prices is more moderate, standing at 2.2 percent, suggesting a nuanced and evolving trend in the local property market.

Shaun Middleton, Head of Distribution at Principality Building Society, observes that the housing market in Wales has faced challenges, influenced by the ongoing strain on the cost of living and the increased expense of mortgages. The shift from lower fixed rates has contributed to predictions of further price declines in 2024, with a potential recovery anticipated in 2025.

Despite these challenges, Middleton highlights some optimistic indicators, such as the lower inflation rate and the expectation that the Bank of England’s interest rate has reached its peak at 5.25 percent, with a projected decline in 2024. Financial markets reflect this anticipation, with forecasts of multiple rate cuts, potentially bringing the Bank of England rate down to four percent later in the year. This shift is already reflected in the mortgage markets, where lenders have responded by significantly reducing rates amid heightened competition, a trend expected to persist.

In the closing quarter of 2023, the property market in Wales exhibited a mixed landscape. While Cardiff and Caerphilly showcased resilience with record high home prices at £308,648 and £207,904, respectively, the overall trend was marked by subdued conditions. Notably, 18 out of the 22 local authorities reported year-on-year declines in property prices.

Six areas faced substantial challenges, with Monmouthshire, Carmarthenshire, Blaenau Gwent, Torfaen, Denbighshire, and Merthyr Tydfil all experiencing double-digit drops in property prices compared to the same period the previous year. Merthyr Tydfil led the decline with a notable fall of 21.2%, reflecting the localized challenges in these regions.

Despite the overall market challenges, the transaction activity in Wales remained notable, with approximately 9,700 property transactions by the end of 2023. Although this represented a modest decline from the previous quarter, it marked a more significant 20% decrease when compared to the same period the previous year. The dynamics in transaction volumes suggest a market navigating through varying pressures and conditions across different localities in Wales.

Sales across all property types in Wales have seen a decline, with detached properties experiencing the most significant drop at 27%, trailing behind other property categories. The housing market in Wales, much like the rest of the UK, grapples with various pressures impacting both demand and overall activity levels. Throughout 2022 and 2023, quarterly sales transactions in Wales have consistently shown a year-on-year decline.

Analyzing price movements by property type reveals a decline ranging from one to seven percent compared to the same period the previous year. Notably, flats have witnessed the most substantial fall from their peak prices, experiencing an almost nine percent decrease since June 2022. These trends underscore the challenges faced by different property segments in the Welsh market amidst evolving economic and market conditions.

Middleton continues: “Consumer confidence is becoming less negative, and the same is true of surveyor respondents to the latest RICS Wales housing market survey. More instructions are coming into the market and there is a sense that activity will increase, and on the back of that, prices might stabilise. Some analysts for the overall UK market are now suggesting that while the first quarter might still see prices in negative territory, there will be a steady improvement across the year. 

“Without doubt, there will be challenges ahead, but the outlook for 2024 is more of an improving view than it was. Potentially, UK Government Budget measures might seek to stimulate market activity which would add further momentum, and of course housing will loom large in the manifestos being readied for the approaching General Election when it is called. In summary, it is an improving picture for 2024. 



House Prices Index UK, Lender Reports, Principality Building Society

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