UK house prices rose for the second month in a row, up by +0.5% in November or £1,394 in cash terms, with the average house price now sitting at £283,615. Over the last year, despite the wider economic headwinds, property prices have held up better than expected, falling by a relatively modest -1.0% on an annual basis, and still some £40,000 above pre-pandemic levels.

The resilience seen in house prices during 2023 continues to be underpinned by a shortage of properties available, rather than any significant strengthening of buyer demand.

That said, recent figures for mortgage approvals suggest a slight uptick in activity levels, which is likely as a result of an improving picture on affordability for homebuyers, said Kim Kinnaird, Director, Halifax Mortgages.

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Kinnaird continued, with mortgage rates starting to ease slightly, this may be leading to increased buyer confidence, seeing people more inclined to push ahead with their home purchases.

However, the economic conditions remain uncertain, making it hard to assess the extent to which market activity will be maintained.

Other pressures – like inflation, the broader cost of living, overall employment rates and affordability – mean we expect to see downward pressure on house prices into next year.

Nations and regions house prices

Northern Ireland is the strongest performing nation or region in the UK, with house prices increasing by +2.3% on an annual basis.

Properties in Northern Ireland now cost on average £189,684, which is £4,294 higher than the same time last year.

House prices in Scotland also continue to show resilience, though growth has flattened over the last year (0.0%), with the average property in the country now costing £203,116.

Wales recorded one of the lowest annual falls (-1.5%), with homes selling for an average of £215,787 in November.

At the other end of the scale, property prices in the South East fell most sharply when compared to other UK regions over the last year (-5.7%) to £373,943, a drop of -£22,702.

London retains the top spot for the highest average house price in the UK, at £524,592, though prices in the capital have now fallen by -3.8% on an annual basis.

HMRC monthly property transaction data shows UK home sales decreased in October 2023.

UK seasonally adjusted (SA) residential transactions in October 2023 totalled 82,910 – down by 2.5% from September’s figure of 85,060 (down 2.0% on a non-SA basis).

Quarterly SA transactions (August 2023 – October 2023) were approximately 0,6% higher than the preceding three months (May 2023 – July 2023).

Year-on-year SA transactions were 20.5% lower than October 2022 (17.3% lower on a non-SA basis). (Source: HMRC)

Latest Bank of England figures show the number of mortgages approved to finance house purchases increased in October 2023, by 8.5% to 47,383.

Year-on-year the October figure was 17.1% below October 2022. (Source: Bank of England, seasonally-adjusted figures)

The RICS Residential Market Survey results for October 2023 show a subdued market although slightly less downbeat over the month.

New buyer enquiries returned a net balance of -28%, up from -37% in September, agreed sales -25% (up from -35%) and new instructions -7% (up from -15%). (Source: Royal Institution of Chartered Surveyors (RICS) monthly report)

Foxtons CEO, Guy Gittins, commented:

“A second consecutive monthly increase demonstrates further signs of property market positivity today.

Although the market is yet to return to full health when viewing house price performance on an annual basis, it appears as though a freeze in interest rates is helping to boost homebuyer sentiment and bring a greater degree of stability.

This puts us in very good stead looking ahead to the new year”

CEO of Yopa, Verona Frankish, commented:

“It appears as though cooling market conditions have now started to thaw, with multiple house price indices showing that the market is now heading in the right direction, as house prices continue to climb on a monthly basis.

A hold on interest rates has brought greater stability for buyers who are already returning to the market despite the usual Christmas break fast approaching and we’ve already seen seller numbers increase notably in recent weeks.

This suggests that both parties are keen to hit the ground running in the new year and this boost to market sentiment will help to further improve market health.”

Director of Benham and Reeves, Marc von Grundherr, commented:

“Despite a turbulent year, we look set to finish pretty much where we started with respect to house price performance and this is certainly no bad thing given that property values boomed during the pandemic.

While this may seem a tad underwhelming for the nation’s home sellers, they can enter the market with the confidence that their home will continue to command a very strong price indeed and we’ve already seen many make the decision to do so in recent weeks.”

CEO of Octane Capital, Jonathan Samuels, commented:

“While buyers remain somewhat restricted due to higher mortgage rates, we have seen an uptick in the number of mortgage approvals in recent months which suggests that a static base rate is helping to boost market confidence.

So while house prices may have remained largely unchanged and are expected to do so until the end of the year, this does, at least, provide a strong foundation for positive market growth in the new year.”

Commenting on UK house prices rising for the second month in a row according to Halifax house price index data, Tom Brown, Managing Director, Real Estate at Ingenious, said:

“he UK property sector continues to demonstrate its resilience and popularity in the face of high inflation and higher borrowing rates.

Nationally, there remains a significant shortage of housing inventory across most locations and price points.

Consequently, any slow-down in sales volumes from homeowners is likely to be offset by increased demand from renters and investors.

However, it’s essential to note that the situation is not uniform throughout the country and across all price ranges.

When analysing opportunities, it is key to understand the underlying subsectors and regional dynamics.

Taking too broad a view of the market can be misleading.

For instance, the institutional housing sector has experienced fewer disruptions compared to the residential sector due to its long-term investment horizon, rental growth and substantial capital inflows.

The New Year will bring with it a new and exciting set of challenges and opportunities for growth and progression in what we do. We are looking forward to continuing to work with borrowers and investors and delivering for them.

The dynamic landscape of the markets that we serve, and the wider economy requires us to evolve to stay relevant in addressing diverse challenges including the climate crisis, and changes in the way we are all living.

2024 will see Ingenious broaden the reach of our widely embraced development lending product.

This expansion aims to offer extended terms for stabilisation to specialised developers within the rental sectors.

Additionally, special lending terms will be introduced for developers with a specific focus on minimising embedded carbon in their construction practices.”

Tom Bill, head of UK residential research at Knight Frank, said:

“The fact inflation has fallen below 5% is better news for the UK property market than the positive house price readings of the last two months.

The jury is still out on the sustainability of recent rises in such a thin market, but if we are not at the bottom of the current housing market slowdown, we must be close.

The key is that sentiment has become more buoyant in recent weeks as the economic data improves and keeps downwards pressure on mortgage rates.

Transactions numbers, which are a better indicator for the overall health of the market than prices, should be stronger in the next six months than the last six provided a general election is not called in the first half of 2024.

As the economic backdrop improves, the political temperature is rising, which is likely to be the biggest risk faced by the UK housing market over the next 12 months.”

Gareth Lewis, managing director of property lender MT Finance, says:

“There is nothing out of the ordinary in this latest data but signs of ‘business as usual’ for the market.

While there is a slight uptick in prices this shouldn’t be regarded through rose-tinted glasses, as while transactional volumes remain low, we are possibly not seeing the true reflection that increased rates and the cost of living are having on what buyers are willing to pay.

We can already see a reasonable downwards trend being set in the South East, with regional fluctuations becoming more relevant as we move forwards.”

Anna Clare Harper, CEO of sustainable investment adviser GreenResi, says:

“The average house price is 1 per cent below this time last year.

Softer pricing is not a surprise, as higher interest rates have a much more significant impact on the affordability of owning a home than house prices.

The impact of higher rates is starting to be felt, in particular by the group of 2 million property owners with variable rates or fixed-rate terms coming to an end this year, who are starting to feel the pinch.

Across the housing market, demand is down. However, supply is also limited, which is why house prices haven’t fallen more dramatically.

That said, there are good deals to be had.

Investors are picking up opportunities in low risk, high-growth areas where the gap between asking prices and offers accepted (the bid-ask spread) is widest because vendors need to sell – through auction, online portals or through contacts.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says:

“Of course, the shortage of stock is supporting house prices.

There is no doubt either that recent falls in inflation and mortgage rates as well as the continuing strong employment figures have improved confidence in the market.

The other point to bear in mind is that these figures don’t include the approximate 35 per cent of buyers who don’t need a mortgage and are negotiating hardest at present, taking advantage of their stronger bargaining position.

Looking forward, we expect the market to continue to confound so-called ‘expert’ opinions of a larger decline but certainly no great increases either particularly bearing in mind the number of fixed-rate mortgages which are due to end next year.”

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