"Affordability challenges are likely to remain and further modest falls should not be ruled out, against a backdrop of broader uncertainty in the economic environment."
- Kim Kinnaird, director at Halifax Mortgages
The latest Halifax house price index suggests the housing market remains on the road to recovery, with prices climbing 1.3% in January, the fourth consecutive monthly rise.
Prices are now up by 2.5% year-on-year, the highest annual growth rate since January 2023.
Regional house prices
Northern Ireland recorded the strongest growth across all the nations or regions within the UK, up by 5.3% on an annual basis. Properties in Northern Ireland now cost on average £195,760, which is £9,761 higher than the same time in January 2023.
Scotland and Wales both saw positive growth, 4% on an annual basis to £206,087 and £219,609 respectively. The North West (3.2%), Yorkshire and Humber (2.8%), North East (2.0%) and East Midlands (0.5%) also recorded house price increases over the last year.
The South East fell the most last month when compared to other UK regions, with homes selling for an average £379,220, a drop of 2.3%.
London retains the top spot for the highest average house price across all the regions, at £529,528, albeit prices in the capital have declined by 0.4% on an annual basis.
Kim Kinnaird, director at Halifax Mortgages, said: “The recent reduction of mortgage rates from lenders as competition picks up, alongside fading inflationary pressures and a still-resilient labour market has contributed to increased confidence among buyers and sellers. This has resulted in a positive start to 2024’s housing market.
“However, while housing activity has increased over recent months, interest rates remain elevated compared to the historic lows seen in recent years and demand continues to exceed supply. For those looking to buy a first home, the average deposit raised is now £53,414, around 19% of the purchase price. It’s not surprising that almost two thirds (63%) of new buyers getting a foot on the ladder are now buying in joint names.
“Looking ahead, affordability challenges are likely to remain and further modest falls should not be ruled out, against a backdrop of broader uncertainty in the economic environment.”
Karen Noye, mortgage expert at Quilter, commented: “This increase in house prices is a positive sign that the housing market is getting back on its feet, and it seems that the reduction in mortgage rates driven by a combination of competition between lenders and the pricing in of future Bank of England rate cuts lured in more buyers in the new year, feeding into the cautiously optimistic outlook for the housing market this year.
“The Bank of England held interest rates once more at its latest MPC meeting, and it is unlikely to lower them for some time yet unless inflation starts to drop more rapidly. Though we are starting to see a gradual increase in confidence and buyers making a tentative return to the market, there are likely many more prospective buyers still stuck in ‘wait and see’ mode who are holding out in the hopes of securing cheaper deals once the Bank switches stance. Once the BoE does begin making rate cuts, we will likely see house prices buoyed further as there remains a serious lack of supply.
CEO of Yopa, Verona Frankish, added: “Not only have we seen positive market movement with respect to the monthly rate of house price growth in recent months, but we’re now starting to see an improvement with respect to the annual picture and it’s this measure of health that suggests the market is firmly on the up.
"Looking ahead, it’s likely that not only has the property market bottomed out with respect to the decline in house prices seen last year, but it’s also likely that interest rates have now peaked.
"This combination of factors will enthuse both buyer and sellers in equal measure and as the year progresses, we expect further momentum to build.”