- UK house prices rise
- Mortgage rates decrease
- Regional variations persist
According to the most recent data from Halifax, house prices defied expectations and increased by 1.7% in 2023.
The mortgage lender reported that average prices increased by 1.1% in December alone, marking the third consecutive month of price increases.
Presently, the average cost of a property in the United Kingdom is £287,105, an increase of £4,800 from December 2022 but a decrease of £7,000 from the peak price observed in summer 2022.
Kim Kinnaird, a director at Halifax Mortgages, attributes the increase to a scarcity of available properties in the market.
She stated, “While growth in the final three months of the year is encouraging, it was preceded by six consecutive months of property price declines from April to September.”
“A lack of available properties on the market is more likely to blame for the observed growth than the intensity of buyer demand.”
Nevertheless, as long as mortgage rates continue to decline, purchaser confidence may increase in the coming months.
Halifax projects that the average decline in home prices will range from 2% to 4% in 2024. It remains committed to the forecast in light of the most recent data.
“As 2024 progresses, the property market will continue to reflect the broader economic uncertainty, and buyers and sellers will likely be naturally apprehensive about contemplating a move,” Kinnaird continued.
Interest Rates and Market Outlook
Although wage growth has surpassed inflation, thereby alleviating cost of living concerns for certain individuals and enhancing housing affordability, it is probable that interest rates will continue to be high as long as inflation significantly surpasses the target set by the Bank of England.
“Our most recent forecast indicates that house prices may decline by 2% to 4% in the coming year; however, forecast uncertainty remains high in light of the current economic climate, as it has been in recent years.”
Despite the fact that numerous forecasts indicate that home prices could decline this year, some commentators now contend that the situation will be quite different in 2024.
On a daily basis, mortgage lenders reduce rates. Yesterday, MPowered Mortgages, NatWest, First Direct, and TSB all announced mortgage rate reductions.
Continuing from the reductions announced by HSBC yesterday and Gen H and Halifax at the beginning of the year.
In the current year, Lloyds Bank, Leeds Building Society, Bluestone Mortgages, Hodge, and LendInvest Mortgages have all implemented rate reductions.
At present, ten fixed rate agreements are available in the market, each featuring interest rates that fall below 4 percent.
The director of European housing and building materials for investment bank RBC Capital Markets, Anthony Codling, stated, “The demise of the British housing market has been overstated to some degree.” Even though the majority, including ourselves, predicted that home prices would decline in 2023, we do not believe this to be the case in 2024.
“We anticipate that house prices will increase in 2024 due to rising wages, falling inflation, falling mortgage rates, and increased discussion of housing stimulus packages related to the upcoming election.”
“Our 2023 pessimism was misplaced, and we are determined to avoid repeating that error.”
According to the most recent HMRC data, real estate agents are already anticipating a prosperous start to 2024, following a year in which in-house sales decreased by 22%.
Rightmove, the largest online property portal in the United Kingdom, reported a 26% increase in new vendor listings compared to the same period last year.
Real estate agents observed a 17 percent increase in the volume of prospective purchasers contacting them regarding available homes on Boxing Day compared to the corresponding day in 2022. In contrast, increased traffic to the Rightmove website by 8% compared to the previous year.
“January traditionally sees a rebound in the real estate market,” said Jonathan Hopper, chief executive officer of agent Garrington Property Finders. “However, this year’s New Year’s surge has been especially robust, with real estate agents reporting a significant increase in buyer and seller interest.”
The market’s surge in activity can be attributed to two key factors: the noteworthy reductions in mortgage rates that were disclosed this week by multiple prominent lenders, and the growing perception that property prices have reached their lowest point.
The Halifax further computes that the market entered positive territory for the entire year of 2023 due to the price surge observed towards the close of the year.
“Although the Bank of England has not yet provided a clear indication of when it will begin reducing interest rates, the cost of borrowing is already declining, which is reducing the cost of housing.” As buyers reappear, prices are achieving a state of stability.
Although it is still in its nascent stages and the resurgence of the market does not guarantee anything, all indications point to its paradigm shift.
In which areas have home prices experienced the greatest increase or decrease?
In contrast to the findings of Halifax, another mortgage lender, Nationwide, reported a decline of 1.8 percent in average house prices in 2023 last week.
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There is a disparity because the house price indices derive from the mortgage lending of the respective institutions.
Halifax’s typical house price also obscures substantial regional variations.
Northern Ireland exhibited the most substantial increase in house prices among all regions of the United Kingdom in 2023, with an average surge of 4.1 percent compared to the previous year.
Additionally, property values in Scotland rose by 2.6% annually, as reported by Halifax.
In contrast, the South East experienced the most significantly declining housing market, with the cost of a typical property decreasing by 4.5% annually, or £17,755 more than the regional average.
In addition, the South West and East Midlands experienced substantial declines throughout 2023, declining by 3.9% and 3.5%, respectively, as reported by Halifax.
