New data from the Principality Building Society reveals that house prices in Wales have experienced their most significant drop since the 2009 financial crisis.

At the close of 2023, the average house price stood at £234,000, marking a 6% decrease from the previous year's record high. Notably, Merthyr Tydfil saw the most substantial decline, with prices plummeting by over 20%.

Among the few exceptions to this trend, Gwynedd, Anglesey, Cardiff, and Caerphilly were the only areas where house prices registered an increase.

This downturn represents the fourth consecutive quarter of falling house prices in Wales. The figures, released in the Principality Building Society's Wales House Price Index for October to December 2023, highlight the fluctuation in house prices across the 22 local authorities in Wales.

The House Price Index indicates a 6% decline, equivalent to £15,000, compared to the same period the previous year, which recorded a peak price of £249,076. This marks the most significant year-on-year drop in Wales' average house prices since the aftermath of the 2008 global financial crisis.

Despite the current decline, house prices in Wales remain 25% higher than they were five years ago. However, the figures reveal a generally subdued market, with year-on-year price declines reported in 18 of the 22 local authorities.

While Cardiff and Caerphilly reported record high prices at £308,648 and £207,904, respectively, the overall market reflects a challenging environment, with six local authorities experiencing double-digit price falls. Merthyr Tydfil reported the most substantial fall at 21.2%.

Shaun Middleton, Head of Distribution at Principality Building Society, acknowledged the housing market's challenging period, attributing it to the persistent cost of living pressures and increased mortgage costs as households transitioned from lower fixed rates.

Despite the current challenges, Middleton sees some positive signs, including lower inflation and an expectation that the Bank of England rate has peaked at 5.25%, with anticipated reductions in 2024.

"Indeed, financial markets are pricing in several rate cuts, bringing the Bank of England rate down to 4% later in the year," he said. "Mortgage markets have already moved, with lenders cutting rates quite significantly as competition intensifies, and we might expect that to continue."