UK house prices are climbing steadily, nearing record highs not seen since 2022.
- According to Halifax data, house prices rose by 0.3% in September, matching August’s rise.
- The annual inflation rate for house prices stands at 4.7%, the highest since November 2022.
- Favourable market conditions and falling interest rates have restored some buyer confidence.
- Despite positive trends, regional disparities persist and affordability remains a challenge.
House prices in the UK have continued on an upward trajectory, rising by 0.3% in September as reported by Halifax. This rise mirrors the previous month’s increase, marking a third consecutive month of growth. Annual inflation has reached 4.7%, the strongest since November 2022, bringing the average home value to £293,399. This figure approaches the record high of June 2022, a period disrupted by economic policies that led to increased borrowing costs and a market slowdown.
Amanda Bryden from Halifax has highlighted that the recent uptick should not be mistaken for a full market recovery. Although property values have risen by approximately £13,000 over the last year, this increase merely compensates for the previous year’s decline, with a modest growth of just 0.4% over two years. The surge post-lockdown, driven by a demand for larger homes and more space, met an abrupt halt due to the adverse effects of a mini-budget in September 2022.
The easing of interest rates and a lessening cost-of-living crisis have been significant factors in renewing buyer interest. As affordability improves, aided by wage growth and falling rates, confidence amongst buyers grows. The number of agreed mortgages has increased by over 40% in the last year, peaking since July 2022. However, a stark north-south divide is evident, with some regions like the northwest witnessing a 5.1% rise, while eastern England has seen a meagre 2.3% increase.
London remains the priciest region, with average prices rising 2.6% year-on-year to £539,238, yet this remains below the summer 2022 peak. Northern Ireland continues to lead with a 9.7% increase, while Scotland shows 2.1% inflation. Despite the realignment of mortgage rates, affordability challenges persist, forecasting modest house price growth.
Experts offer varying projections about the future. While Amanda Bryden predicts modest growth, Ashley Webb from Capital Economics is more optimistic, suggesting that a quicker-than-expected reduction in interest rates by the Bank of England might spur higher-than-anticipated house price rises by 2025. The outcomes of the coming months will test the resilience and sustainability of this upward trend amidst broader economic challenges.
The UK housing market is showing signs of recovery, though ongoing economic factors will determine the sustainability of this trend.
