December 13, 2023

Due to supply constraints, UK house prices increase for the first time since March

This post was written by: Michael Sayers

Halifax predicts that the market will drop in the near future due to pressure from rising borrowing costs and living expenses.

Halifax, a mortgage company, reports that the average price of a property increased to £281,974 in October, up 1.1% from September. This is a rise of nearly £3,000 and the first time prices have increased since March. Prices decreased 3.2% from October of last year, which was less than the 4.5% yearly reduction in September. There aren’t many houses for sale because prospective sellers seem to be being cautious, according to Halifax Mortgages director Kim Kinnaird. In contrast to buyer demand, which is still modest overall, this is probably what has bolstered prices in the short run.

“While many people will have seen their income grow through wage rises, higher interest rates and wider affordability pressures continue to be challenges for buyers” the speaker continued.

Jeremy Leaf, a north London estate agent and a former Rics residential chair, stated: “We are not getting carried away with the modest rise in prices shown here. Transactions remain subdued, so looking forward we don’t expect to see much improvement in the market until January or February of next year at the earliest.”

South-east England continues to have the highest average house price in the UK at £524,057, down 4.6% from the previous year, while England continues to see the steepest yearly reduction in house prices, down 6%. For the second time in a row, the Bank of England kept interest rates at 5.25% last week—the highest level since the 2008 financial crisis. In an effort to combat persistent inflationary pressures, it suggested that interest rates would likely remain high for an extended length of time and warned that the economy would be on the verge of recession in the upcoming year.

Mortgage rates have somewhat decreased as a result of the anticipated halt of Bank of England rate increases. According to Moneyfacts, the average five-year fixed residential mortgage rate decreased to 5.84% from 5.87%, while the average two-year fixed residential mortgage rate dropped to 6.26% from 6.29% on Monday.

However, Halifax predicts that overall home prices will continue to decline and will start to rise again in 2025.

“The current situation should be viewed within the framework of the longer-term trend in house prices, as prices are still, on average, approximately £40,000 above pre-pandemic levels,” Kinnaird stated. The market for first-time buyers has fared reasonably well as people look to avoid sudden spikes in rental prices. First-time buyer prices have decreased by 2.4% year over year, which is less than the 3.2% decline in market prices over the same period.

As a result of the slowing demand, fewer homes are being built by home builders, which in itself is supporting prices remaining steady or growing. According to a Tuesday statement, Persimmon constructed 37% fewer homes between July 1 and November 6.

It is aiming for a total of 9,500 this year, somewhat more than in August but significantly less than the roughly 15,000 it completed last year. Currently, it has constructed 1,439 residences. The builder acknowledged that, over the last five weeks, sales have increased, demonstrating a “strong pickup” since the beginning of October, but it issued a warning, stating that “market conditions will remain highly uncertain” through 2024.

Here at Aston Bond, we deal with both new build purchases, traditional sale and purchase transactions so if this is something that you need assistance with, please do not hesitate to contact our conveyancing team.