UK house prices rose by 0.7% in January, after taking account of seasonal effects. This resulted in an improvement in the annual rate of house price growth from -1.8% in December to -0.2% in January, the strongest outturn since January 2023.
Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said: “While a rapid rebound in activity or house prices in 2024 appears unlikely, the outlook is looking a little more positive. The most recent RICS survey suggests the decline in new buyer enquiries has halted, while there are tentative signs of a pickup in the number of properties coming onto the market”.
He added: “How mortgage rates evolve will be crucial, as affordability pressures were the key factor holding back housing market activity in 2023. Indeed, at the end of 2023, a borrower earning the average UK income and buying a typical first-time buyer property with a 20% deposit had a monthly mortgage payment equivalent to 38% of take-home pay – well above the long run average of 30%.
Open Property Group chief executive Jason Harris-Cohen said the property market had continued to defy expectations.
“This growth is being driven by an increasing level of buyer confidence, with property prices proving ever resilient, despite a wider landscape of macro uncertainty and interest rates remaining at their highest in over 15 years.
“We expect this confidence will grow further should the Bank of England hold rates again this week and while the decision to do so may cause mortgage rates to creep back up, it’s unlikely to dent the appetite of the nation’s buyers and we expect market activity to continue to build over the year ahead.”
Yopa chief executive Verona Frankish takes a similar line. “The property market has started the year where it left off in 2023 – very much on the front foot. We’re seeing buyers return with confidence, spurred on by a reduction in mortgage rates, and there has also been an increase in for sale stock reaching the market as sellers look to ride this wave of improving market sentiment.
She added; “While we expect that interest rates will remain at 5.25% this week, this will only help to steady the market further, providing buyers with the confidence that they can proceed with their purchase without the goal posts of mortgage affordability moving during the process.”
GreenResi chief executive Anna Clare Harper pointed out that while house price rises are positive for homeowners, there are strong differences between the ‘haves’ and the ‘have nots’ in housing.
“The combination of mortgage interest rates still too high for an average home to be affordable, and limited access to deposits for aspiring homeowners, make owning a home unaffordable for many. House price rises do not help”.
“However, building new homes is too slow to meet the pace of growth in demand. This means that improving the quality and volume of rental homes – or at least reducing the loss and decline of rental homes – is a critical part of the solution to the social problems associated.”
SPF Private Clients chief executive Mark Harris said: “Those in London and the southeast continue to find it difficult to get on the housing ladder and move up it, thanks to the higher cost of housing. First-time buyers are calling upon the Bank of Mum and Dad more than ever”.
Harris added that although the Bank of England is expected to hold base rate again when it meets this week, there was a growing feeling that it is only a matter of time before rates start to come back down, bringing further relief to borrowers.
