Wales housing market slowdown expected after average house price hits record high

House prices in Wales reached a record high at the end of last year but a slowdown is expected, according to new report.

The average house price in Wales reached a new peak of £249,076 at the end of 2022, but cost of living pressures, higher interest rates and stagnant earnings are expected to lead to a market slowdown.

Figures released from Principality Building Society’s Wales House Price Index shows an an almost double-digit price rise (9.9%) when compared to the same period the previous year.

However, this is the weakest annual price rise in Wales since early 2022 and points towards a more subdued outlook for the housing market in 2023.

Prices also rose by a modest 1.3% between October and December 2022 - one of the lowest rates since early 2020, reinforcing that the strong quarterly rate of house price inflation reported a year ago has dropped considerably. 

The index shows the rise and fall in house prices in each of the 22 local authorities in Wales.

House prices across Wales reached new highs in ten of the twenty-two local authorities in Q4, but for the first time in over two years, more local authorities reported quarterly price falls than increases.

It also showed that only four local authorities reported consistent increases quarter-on-quarter through the whole of 2022 including: Blaenau Gwent, Bridgend, Cardiff and Carmarthenshire.  However, Conwy posted just one quarterly increase – in the second quarter of 2022.

House prices in Anglesey have dropped by more than £50,000 from the all-time peak reported in Q3 2022.

The report estimates that there were about 12,600 transactions in Wales between October and December 2022, up a little on the previous quarter, but about 5% lower than Q4 2021. However, these figures may be somewhat flattered by buyers moving quickly to complete purchases while favourable mortgage deals were available. 

Shaun Middleton, Head of Distribution at Principality Building Society said: “Looking back at 2022, Wales has not suffered the more extreme price volatility seen in England. Typically, the housing market was more buoyant than expected partly because of the long-term issue of the shortage of the supply of homes, combined with pent-up demand.

“Matters have improved since the tumultuous mini budget last September, with lenders returning to the market which increased competition and modestly reduced mortgage rates. It does appear that the era of exceptionally low mortgage rates is over."

He added: “Clearly, there will be a more challenging environment in 2023, with the higher cost of mortgages, rising cost-of-living pressures, plus a further fall in real earnings. These factors will contribute to a slowing market, with house prices widely predicted by analysts to drop slightly.

"More than 1.4 million households will be coming off much lower fixed-rate loans this year and some could face a payment shock, although the stress tests which have been in place over the last ten years should mean that most mortgaged households will have the capacity to cope with the increase.”