The UK housing market witnessed a surge of optimism as Nationwide reported a 0.7% increase in house prices in January, a crucial month before the Bank of England’s impending interest rate decision. This slight rise has improved the annual rate of house price growth from -1.8% in December to -0.2% in January, marking the strongest performance since January 2023.
Robert Gardner, Nationwide’s Chief Economist, highlights recent positive trends for potential buyers, noting the continued downward trend in mortgage rates. “This follows a shift in view amongst investors around the future path of Bank Rate, with investors becoming more optimistic that the Bank of England will lower rates in the years ahead,” he says. However, Gardner adds that the evolution of mortgage rates will be crucial, as affordability pressures were a significant deterrent in the housing market in 2023.
At the end of 2023, a borrower earning the average UK income and buying a typical first-time buyer property with a 20% deposit faced a monthly mortgage payment equating to 38% of take-home pay – significantly higher than the long-run average of 30%.
Jason Tebb, President of OnTheMarket, observes that the housing market has had a robust start to the year, with falling mortgage rates encouraging both buyers and sellers. Marc von Grundherr, Director of Benham and Reeves, notes the emerging confidence among buyers, spurred by reduced mortgage rates. “We’ve seen a coiled spring of buyer demand developing in recent months,” he adds.
Verona Frankish, Chief Executive of Yopa, also remarks on the buoyant start to the year, with an increase in for sale stock and buyers returning with renewed confidence. Daniel Austin, CEO and co-founder at ASK Partners, comments on the Nationwide House price index data, stating: “Today’s data shows that the property sector is beginning to show signs of recovery. With a decline in inflation YoY and the peaking of interest rates, the overall outlook has considerably improved.”
Tom Bill, head of UK residential research at Knight Frank, predicts that UK house price declines are bottoming out, with an expected rise in house prices by 3% this year. Meanwhile, Matt Thompson of Chestertons and Anthony Codling of RBC Capital Markets anticipate modest rises in house prices during 2024, rather than falls.
Emma Cox, MD of real estate at Shawbrook, comments on the recent transaction dip as a minor setback in an otherwise optimistic start to the year. “This is particularly encouraging for professional property investors,” she adds.
Russell Quirk, a TV pundit and property expert, took to X (formerly Twitter) to express his views: “The grim reaper doom-mongers are going to have to work hard to manipulate these positive numbers into a negative today!”
Jason Harris-Cohen, CEO of Open Property Group, concludes: “The property market has continued to defy expectations, registering strong signs of improvement with house prices increasing on a monthly basis yet again and now sitting just shy of where they were this time last year.” He anticipates further growth in buyer confidence, especially if the Bank of England maintains current interest rates.
