UK house price hotspots 2023: where values have risen fastest

Which areas have seen the biggest jumps in house prices this year? And which have been the coldspots?

There are few bigger cliches when it comes to property than location, location, location.

However, the fact that it’s a cliche doesn’t stop it being true ‒ ultimately one of the biggest factors in the value of any home is always going to be where it is.

A modest house in a sought-after area is likely to set you back far more than a more salubrious property in a part of town where nobody wants to live, after all.

While house prices generally have had a rocky year to date, there have been exceptions.

Sure, the main house price indices all reckon that house prices have dropped by around 3% over the last 12 months, but certain areas have performed far more impressively.

A new study from the property experts at Hamptons makes that clear, digging into how the value of homes in various local authorities across the country, utilising average transaction prices.

The house price hotspots of 2023

Let’s start with the hall of fame, the local authorities that have seen the most significant increases in average house prices based on transactions throughout 2023.

Many of them are either coastal or within a short distance of coastal towns, highlighting the desirability of life by the sea.

Many of these standout areas also enjoy excellent transport links to major towns and cities.

That makes them a good fit for commuters, particularly those who can work from home a couple of days a week, something that has become far more common since the pandemic. 

The areas with the biggest house price falls

Of course, most areas in the UK have not seen such house price growth this year. Indeed, in the majority of cases average house prices have fallen over 2023 so far.

However, just as some areas have outperformed the national average, so too have others significantly underperformed.

According to Hamptons, these are the areas which have seen the most substantial house price falls so far.

Most of the bottom 10 have seen prices drop by under 2.5% ‒ a blow for sure, but not necessarily the end of the world.

Kensington and Chelsea is very much the standout, not just because of the percentage drop but also what that translates to in cash terms.

Ouch.

It just shows that even buyers at the top end of the market have opted to hold fire on their purchase plans as mortgage rates have grown. 

The role of mortgage rates in house price falls

The big driver in the house price falls seen this year has been the jump in mortgage interest rates.

As the Base Rate has increased, so too have the rates on our home loans, and that has prompted plenty of people who were considering moves to put those plans on hold.

Estate agents have reported drops in registrations from prospective buyers for precisely this reason, while vendors have had to accept big drops from the asking price if they want to shift their property.

According to Zoopla, for example, vendors are currently accepting an average of a 5.5% drop off the asking price, a six-year high.

In cash terms that works out at an average of a whopping £18,000 off, a mighty saving for buyers brave enough to push on with a deal.

What does 2024 have in store for house prices?

However, the chances of house prices dropping further next year are being undercut by mortgages getting cheaper.

Recent weeks have already seen a succession of lenders opt to trim rates below 5% on certain fixed rates, a trend that looks likely to continue.

One of the main factors in the pricing of fixed-rate deals are swap rates, which are effectively what lenders pay for the funding they use for their own mortgage activity.

And those swap rates are influenced not by what Base Rate is right now, but what the expectations are for the future prospects for the Base Rate.

The belief is that Base Rate has peaked, given the recent drops in inflation, with talk already turning to when Base Rate will start to be reduced.

There have even been predictions that the first cut will take place in the second half of next year, and that belief is driving down swap rates, allowing lenders to offer more competitive deals. 

These cheaper mortgage rates will inevitably mean some of those buyers who have postponed purchase plans return to the market. 

Only time will tell whether this translates into house price growth, or whether it simply limits the extent of further house price falls.

But given the shortage of housing in the UK, it seems unlikely that significant falls are in prospect next year.