It’s a national preoccupation: how far have house prices fallen, and how much further will they drop?

Property prices started to fall on a monthly basis at the end of 2022, but the real downturn is about to hit as the market reels from the effects of soaring mortgage rates.

So how do we measure the real state of the market? The sheer number of house price indices can be overwhelming, each one showing a different aspect. 

A key question to ask when looking at a house price index — the trackers that boil down the market into average price — is what exactly it's measuring.

Those that use asking prices, such as property site Rightmove, are among the most immediate bellwethers of the market.

But rather than show actual sales these figures reflect seller sentiment, not the deals eventually being struck. 

Indices using prices at the time of mortgage approvals, such as those by lenders Nationwide and Halifax, offer a more concrete indication of the agreed sale price of properties, and are considered particularly reliable and up-to-date.  

Their drawback is that they do not capture the cash-based market, nor account for any eleventh hour tweaks to price.

That is why most concrete of all is price at completion, as reported by the Office for National Statistics.

But the catch is that the data is significantly lagged, reflecting the situation from three months ago or more.

Aside from which data to use, another key way to analyse the current state of the market is to compare its trajectory with that of previous house price crashes.

By adjusting prices in terms of the fall from their peak, which for the current downturn was August 2022, it is possible to plot how quickly they are falling alongside 2008.

In the current downturn, house prices have so far fallen at the same rate since their peak. 

Then, as the financial crisis took hold, average values fell by nearly 20pc in under two years – with some areas suffering far worse than others.

Whether the current fall reaches those depths remains to be seen, though mainstream forecasts are, for now at least, not as pessimistic.

One of the key predictions for the housing market comes at the time of each government Budget, when the Office for Budget Responsibility unveils its forecast.

The latest, published in March 2023, shows price falls bottoming out in 2024.

What will be key to this forecast’s accuracy going forward are the interest rate decisions the Bank of England makes over the next year.

Sharply rising mortgage rates explain much of the current fall, and the fate of the market lies in large part with how high the Bank rate moves, as that affects the cost of borrowing.

The more expensive a buyer’s mortgage is, the less they can offer on a property.