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The average house price in Wales has fallen to £245,101 at the start of 2023, according to data collated by the Principality Building Society.

This is the first drop since the pandemic – down 1.6% on the previous quarter (Oct – Dec 2022) from £249,000.

The quarterly drop has meant that compared to the same period the previous year, the annual price rise is 5%, half the rate of three months earlier and the lowest annual increase since 2020.

This is reflected across Wales in 2023’s first quarter, with more local authorities reporting quarterly price falls than increases. Principality’s House Price Index shows that only four of the 22 local authorities reported new peak prices – Blaenau Gwent, Newport, Vale of Glamorgan and Torfaen.

Compared to this time last year, house prices in Caerphilly are up by 6.1%, but have fallen 4.1% compared to an average price of £199,869 in the last three months of 2022.

Transaction levels were hit significantly following last autumn’s mini-budget and the subsequent increase in interest and mortgage rates. As a result, activity in January-March 2023 was the weakest since 2020 pandemic levels, with sales down 17% year on year and 26% quarterly, to a figure of just over 9,100 transactions.

Shaun Middleton, Head of Distribution at Principality Building Society, said: “Much like the rest of the UK, housing market conditions in Wales are more subdued than in previous quarters. We are at a point in the housing market cycle where wider economic factors are weighing more heavily on, and affecting the existing underlying demand for homes. Future prices will be determined by key variables such as the movement of interest rates, inflation and the impact of the cost of living crisis.

“The radical shift in mortgage rates over the last year cannot be disregarded, moving from a decade at around 2% to closer to 5% in the space of 12 months. We expect rates to settle around this level for the remainder of 2023 and into 2024. We are seeing increased signs of lenders competing to attract business: rates have been edging down and lenders are looking for new ways to support borrowers who are struggling with mortgage affordability.”

The average price by property type in Wales over the past three months is reported to be £364,275 for detached homes, £226,347 for semi-detached homes, £171,290 for terraced homes and £152,576 for flats.