Average house prices have risen for the fourth month in a row, according to the latest figures from Halifax.
The mortgage lender revealed that average prices rose by 1.3% in January alone. The typical home now costs £291,029, which is almost £4,000 more than in December.
The resurgence of prices in recent months means that year-on-year, house prices are up 2.5%, based on Halifax's data.
On the up: The average house price in January was £291,029, up 1.3% or, in cash terms, £3,924 compared to December 2023
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Kim Kinnaird, director at Halifax Mortgages, said "falling mortgage rates helped reverse the consecutive monthly house price falls that were recorded between April and September last year."
Mortgage lenders began cutting rates from September and this rate cutting continued into 2024. In January alone, more than 50 mortgage lenders cut their residential rates - some more than once. While the cuts have largely come to a standstill over the past two weeks, and some lenders have increased their rates, borrowers securing the cheapest deals can now get a rate of just below 4 per cent when fixing for five years or just above 4 per cent when fixing for two years.
Kinnaird said "the recent reduction of mortgage rates from lenders as competition picks up, alongside fading inflationary pressures and a still-resilient labour market, has contributed to increased confidence among buyers and sellers. This has resulted in a positive start to 2024's housing market. However, affordability pressures remain given that mortgage rates remain far higher than they were prior to when rates first soared in 2022. While housing activity has increased over recent months, interest rates remain elevated compared to the historic lows seen in recent years and demand continues to exceed supply. For those looking to buy a first home, the average deposit raised is now £53,414. It's not surprising that almost two thirds of new buyers getting a foot on the ladder are now buying in joint names. Looking ahead, affordability challenges are likely to remain and further modest falls should not be ruled out, against a backdrop of broader uncertainty in the economic environment."
Yearly rise: After a fourth consecutive month of house prices rising, the pace of annual growth is now 2.5%
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Market on the up according to estate agents
Estate agents are widely reporting that Halifax's figures line up with what they're seeing on the ground in the housing market.
In fact, some believe that house prices could start to rise sharply in some areas. Simon Gerrard, managing director of Martyn Gerrard Estate Agents said "last year, a lot of people put their property searches on hold to weather wider economic turbulence. Now, however, the economy has started to stabilise, and it's encouraging that large lenders are responding the right way to inflation coming under control by bringing down interest rates. Whilst affordability of homes at this moment is quite good, a quickly increasing population and total lack of new housing supply means prices will then start to rise sharply, particularly in London."
Jeremy Leaf, north London estate agent and a former Rics residential chairman added "in our offices, more valuations, listings and especially viewings, has been the result."
Marc von Grundherr, director of Benham and Reeves said "the general view is that 2024 will be a far more fruitful year for the UK property market and we're already seeing early signs of this, with a fourth consecutive monthly increase in house prices and a sharp increase in both new sales listings and the number of buyers submitting offers. It really is all systems go at the moment and as market activity continues to build, property values will continue to ripen."
Verona Frankish, chief executive of online estate agent Yopa, also believes the housing market will continue to build momentum as the year progresses. "Looking ahead, it's likely that not only has the property market bottomed out with respect to the decline in house prices seen last year, but it's also likely that interest rates have now peaked,' said Frankish. This combination of factors will enthuse both buyer and sellers in equal measure and as the year progresses, we expect further momentum to build."
Different housing markets
The average UK house price won't reflect everyone's experience, given that the property market is made up of thousands of independent micro markets.
Even when looking at different UK regions, it is already possible to see significant differences. Northern Ireland recorded the strongest growth across all the nations or regions within the UK, according to Halifax. House prices there increased by 5.3% year-on-year. Scotland and Wales both saw positive growth of 4% on an annual basis, according to Halifax.
Typical prices in the North West of England rose by 3.2%, while Yorkshire and Humber saw prices rise by 2.8%. Prices in the South East fell the most last month when compared to other UK regions, with homes selling 2.3% below this time last year.
While London retains the top spot for the highest average house price across all the regions, at £529,528, prices in the capital have declined by 0.4% year-on-year.
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Property market is turning positive
Homebuyer and seller activity has finally started to turn positive, according to the Royal Institution of Chartered Surveyors (RICS) suggests. The latest RICS Residential Market Survey shows new buyer enquiries were at +7% in January among respondents, up from -3% in December and the strongest level since February 2022.
The percentage balance measure for agreed sales has also flipped from -5% to +5%, while respondents saw sales picking up over the next three months, with +14% on balance stating that they believe rises are coming. Sales volumes are on the rise, influenced by expectations of future interest rate cuts by the Bank of England, RICS said.
Longer-term, +44% said they believe that sales volumes will increase over the next twelve months.
Near-term price expectations have now turned more or less flat at the national level, the report suggests, with the net balance moving to -2% from -12% previously. On a 12-month view, a net balance of +18% of respondents now expect a mild increase in house prices, the strongest reading since July 2022.
Tarrant Parsons, senior economist for RICS, said “the UK housing market has seen a continued improvement in buyer activity through the early part of the year, supported by the recent easing in mortgage interest rates. Although sales volumes through much of the year ahead are likely to remain relatively subdued compared to the longer-term average, the outlook has now turned modestly brighter on a consistent basis over the past few survey reports. However, this is not to say that mortgage affordability isn’t still a significant challenge, and any further unwelcome surprises with regards to inflation may still cause interest rate expectations to be revised. That would then pose a significant risk to any prospective recovery in the months ahead, even if the current prognosis is for the market to see a further pick-up in activity levels.”
Commenting on the report, Tom Bill, head of UK residential research at Knight Frank, said “leading indicators of demand have turned more positive and we expect the number of mortgage approvals and exchanges to catch up this spring. As inflation falls faster than expected, the improved outlook for rates on money markets means lenders have dropped their prices, irrespective of how cautious the Bank of England is sounding. We expect a 3% rise in UK house prices this year despite the presence of some inflationary pressures and rising political volatility.”