Property Prices in the England Aren’t Falling Much When You Account for Size

A lot has been made of the fall in property prices in the UK. The average property sold for £305,000 in September 2023 down from £311,000 at the same time last year. At the same time, energy certificate data shows that the average property sold in September 2023 was 2.9% smaller than that sold at the same time last year. It looks like people are opting for smaller homes to keep their monthly payments low. The chart below shows that the median price price per square metre (in orange) has been far more smooth than the total price (in blue)

Year on year from September 2022 to September 2023 median property prices have declined 3.8% overall, while the decline in price per square metre is lower at 2.3%. In the north west where overall prices declined by over 5%, the decline was just 1% when size is taken into account. Most remarkably, in the north east a fall of 3.4% in total property price changed into an increase of 3.2% when looking at price per square metre.

RegionMedian Total Price Change%Median Price per Sq/m Change %Median Size Sq/M Change %
All England-3.8-2.3-1.2
North West-5.1-1.0-3.4
South East-4.6-1.5-1.2
East of England-4.3-3.7-1.2
South West-3.8-1.60.0
North East-3.43.2-1.2
London-1.5-1.0-2.4
Yorkshire and the Humber2.62.5-3.6
West Midlands3.02.4-1.2

What is interesting is that the trajectory of sold property sizes roughly follows sold property prices. When interest rates are low and the economy is doing well, people are more likely to buy bigger properties. Remember when people wanted bigger homes to work out of during the pandemic and were enabled to buy them by the low interest rates at the time? When the opposite is true, not only do buyers withdraw but so do sellers who know that their larger properties won’t sell in this market. Since September 2019, the average home sold has gone from 85 sq/m to 83 sq/m. While this might not seem like a big change, with the prices across England being £3,247 per sq/m this is roughly £6,500 on a median home price of £272,000 or roughly 2.3%.

This trend of higher priced properties simply not coming on the market is further reflected in the difference between median and average prices. Widely reported average property prices fell 7.6% last year while the less loved (and less dramatic) median fell by half that at 3.8%. Average prices are skewed by higher value transactions while the median is reflective of what most people pay – when multi-million pound mansions don’t sell, the average goes lower but the median doesn’t. Here’s a chart showing the four ways of measuring the change in property prices in England over the last year that I’ve used in this post:

Total PricePrice Per Sq/M
Average-7.6%-4.4%
Median-3.8%-2.3%

While the decline in property prices can be sliced and diced in a number of ways, the number of transactions has unequivocally fallen over the last three years. Sales have gone from just under 60,000 a month in September 2019 to below 20,000 in September 2023, even lower than when the pandemic lockdown initially hit.

The dynamics of the housing market are complicated. As interest rates fall over the next year expect higher price properties to come back on the market and average prices to start ticking back up. The Bank of England’s rise in interest rates hit the property market most directly in the form of higher mortgage rates – expect the reverse to be true when rates fall. The pent up demand of owners who want to move, those unable to find rental properties and young people living with their parents combined with the reduced supply caused by the stoppage of construction during the pandemic and the lower start rates because of higher interest rates straight after is going to result in an increase in house prices that should comfortably compensate for the real decline over the last two years.

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