Demand for larger homes has been the driving force behind UK property price increases over the past year, according to new research from Halifax. Easing interest rates have improved mortgage affordability, allowing buyers to target more spacious properties and pushing average house prices up by 3.7% – or £10,431 – in the 12 months to January 2025.
Detached and terraced houses lead the way
Halifax’s data shows that detached properties have seen some of the largest gains, with prices increasing by 4.1% to an average of £471,748. Over the past five years, the average value of a detached house has climbed by over £100,000 – a 29.6% rise since 2020 – making them the best-performing property type in terms of long-term price growth.
Terraced houses also recorded strong gains, with prices up 4.5% in the past year to an average of £235,296 – an increase of £10,025. Amanda Bryden, Head of Halifax Mortgages, noted that larger homes have become more attractive as borrowing conditions have improved. “Now, as interest rates have started to ease, it’s once again those homes offering more space which are fuelling demand,” she said.
In contrast, flats saw more modest growth at 3.2%, with the average price now at £168,569. Bryden highlighted the shift in buyer behaviour: “This time last year, the average price of a flat had risen more quickly than a detached house, as buyers adjusted to higher borrowing costs and sought to compensate by targeting smaller properties.”
Regional price growth varies significantly
The North East saw the strongest growth for flats, with prices rising by 15.1% (£13,141) to £100,123, while the East Midlands experienced a slight decline of -0.6% (-£705). Detached houses in Northern Ireland posted the highest annual increase at 15.2% (£35,857), bringing the average price to £271,557. Meanwhile, detached homes in London remain the most expensive in the UK, averaging £944,526 – around five times more than in the North East.
Interestingly, terraced houses saw the highest growth in the North East, rising by 8.4% (£10,263), while Yorkshire and Humberside posted the slowest growth at 2.7%. Semi-detached houses also performed well, with prices increasing by 3.8% to an average of £307,685 – the biggest rise was in Northern Ireland at 7.0% (£11,835).
First-time buyers face widening price gaps
The cost of stepping onto the property ladder is increasing, with the average price for a first-time buyer rising to £235,195 – a 3.2% increase from the previous year. Flats remain the most popular choice for first-time buyers, accounting for 27% of all purchases, but this figure climbs to 71% in London, where prices are higher.
New builds, however, are bucking the trend. Prices for new build flats increased by 6.7% over the past year, far outpacing the 3.1% average growth for newly built properties overall. Buyers of new build flats now pay a significant premium, with the average price sitting £71,865 above that of existing flats.
Bryden acknowledged the growing challenge for first-time buyers: “The gap between the rungs on the housing ladder has widened further, presenting a bigger challenge to those looking to make the step up. However, slower growth among smaller homes is helpful for first-time buyers, and we saw a big rebound in that market last year, with a fifth more stepping onto the ladder.”
Toby Leek, President of NAEA Propertymark, the professional body for estate agents, comments:
“Not only are buyers looking to take advantage of easing interest rates to secure a bigger home, but other trends, such as a continued increase in people looking for parking spaces and electric vehicle charging, as well as the surge in desire for outside space post-pandemic are pushing more buyers to pursue larger properties with driveways and gardens, moving away from apartments and flats.
“Terraced homes are likely proving popular amongst buyers as they often offer a home with a larger garden and parking at a more affordable price allowing many to maintain a sustainable financial balance.
“As different areas across the country offer more value for money, it’s likely we will continue to see buyers adjusting their criteria and broadening their search areas.”
While larger properties are driving growth, landlords may benefit from the increasing demand for flats and smaller homes among first-time buyers looking for affordability. The shift towards larger properties reflects changing buyer priorities, but the steady demand for smaller homes – especially new builds – suggests a balanced market with opportunities for both landlords and buyers in the coming years.
