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UK House Prices Show Slight Recovery Despite Ongoing Market Challenges

The latest Nationwide House Price Index for November 2023 reveals a complex picture of the UK property market, with house prices showing a modest increase of 0.2% over the month, yet experiencing a 2% decline over the year. This marks a smaller annual fall compared to the previous month’s 3.3% decrease. The average house price now stands at £258,557.

Sarah Coles, head of personal finance at Hargreaves Lansdown, commented on the situation, saying, “A dearth of homes for sale has put a floor under prices, which rose slightly during November. But life remains tough for sellers.” She highlights the challenges for sellers in the current market, noting that despite prices rising for the third consecutive month, the process of actually selling a home remains difficult, with property sales dropping significantly over the past year.

Coles also pointed out the role of mortgage rates in the current market dynamics. While rates have fallen from their summer peak, they remain higher than earlier in the year, dampening buyer enthusiasm. The Bank of England’s long-term forecast suggests interest rates could remain elevated, potentially leading to more pain for the housing market.

Despite these challenges, there have been some positive signs. Mortgage approvals for purchases saw a slight increase in October, providing a glimmer of hope. However, these numbers are still below pre-pandemic levels. The Office for Budget Responsibility anticipates a further decline in house prices, expecting a 4.7% fall in 2024.

Foxtons CEO, Guy Gittins, expressed optimism, noting the consecutive monthly increase in house prices and the stabilizing effect of a freeze in interest rates. Yopa CEO, Verona Frankish, echoed this sentiment, observing an increase in mortgage approvals following the decision to hold the base rate at 5.25%, and anticipating a more settled market in the new year.

Marc von Grundherr, Director of Benham and Reeves, remarked on the unusual strength in house prices during a typically slow season, suggesting a positive outlook for the market. Jonathan Samuels, CEO of Octane Capital, also commented on the impact of higher mortgage rates and the stabilizing effect of the base rate hold, predicting a gradual improvement in market conditions.

Overall, the UK property market is showing signs of recovery, but sellers continue to face challenges due to higher mortgage rates and economic uncertainty. The situation remains fluid, with experts keeping a close eye on market developments as we move into the new year.