House prices in Wales hit a record high at the end of 2022. The average house price in Wales peaked at £249,076 in Q4 last year, according to the Principality Building Society's latest Welsh House Price Index.
While this was 9.9% higher than the previous year, it was the weakest annual price rise in Wales since early 2022 and points towards a more subdued outlook for the Welsh housing market in 2023 as cost of living, higher interest rates and stagnant earnings affect incomes.
Prices also rose by a modest 1.3% between October and December 2022 - one of the lowest quarterly increases since early 2020 and reinforcing that the strong quarterly rate of house price inflation reported a year ago has dissipated considerably.
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The index recorded rise and falls in house prices in each of the 22 local authorities in Wales. House prices reached new highs in 10 of the 22 local authorities in Q4 but for the first time in over two years, more local authorities reported quarterly price falls than increases.
Only four local authorities reported consistent increases quarter-on-quarter through the whole of 2022 - Blaenau Gwent, Bridgend, Cardiff and Carmarthenshire. While Conwy posted just one quarterly increase – in the second quarter of 2022.
House prices in Anglesey dropped by more than £50,000 from the all-time peak reported in Q3 2022. The new average price for Anglesey of £254,046, down 3% annually and 17.5% quarterly in Q4 due to the high average rise of 15.3% in Q3.
The report estimates that there were about 12,600 transactions in Wales in Q4, 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.
For the year as a whole, sales are on a par with levels in 2019, pre-Covid, but noticeably weaker than in 2021 - around 12% lower. Much of the decline in sales relates to detached properties (26% lower) and semis (down 12%). Flats are the only property type with a higher volume of sales, albeit with a negligible increase of 1%. This might suggest that affordability pressures are beginning to produce a greater demand for flats.
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. Depending on trends in inflation and the actions of the Bank of England in terms of pushing up the base rate to counter that, we can expect mortgage rates to remain somewhat elevated for the foreseeable future.”
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.”
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