House prices stagnate but flats rise in value as buyers swap to smaller properties

Homebuyers are increasingly targeting smaller properties, particularly flats, in their desire to get on the property ladder while coping with higher borrowing costs, the Halifax has said.

As expensive mortgage lending continues to constrict the market, Halifax said average monthly UK house prices inched up 0.1 per cent in April. It follows a 0.9 per cent drop in March.

Year-on-year, property price growth in April was up 1.1 per cent – compared with 0.4 per cent over the year to March.

A typical UK home cost £288,949 in April, compared with £288,781 in March, Halifax said.

Amanda Bryden, head of mortgages at Halifax, said: “While there is always much scrutiny of monthly price changes – and a degree of volatility is to be expected given current market conditions – the reality is that average house prices have largely plateaued in the early part of 2024.

“This reflects a housing market finding its feet in an era of higher interest rates. While borrowing costs remain more expensive than a few years ago, homebuyers are gaining confidence from a period of relative stability.

“Activity and demand is improving, evidenced by greater numbers of mortgage applications so far this year, while at an industry level mortgage approvals have reached their highest point in 18 months.

“Our recent research also found that buyers are adjusting their expectations, with first-time buyers in particular compensating for higher borrowing costs by targeting smaller properties.

“We see this reflected in property prices for the first few months of this year, with the value of flats rising most sharply, closing the ‘growth gap’ on bigger properties that’s existed for most of the last four years.

“However, we can’t overlook the fact that affordability constraints are still a significant challenge, for both new buyers and those rolling off fixed-term deals.

“Mortgage rates have edged up again in recent weeks, primarily as a result of expectations around future Bank of England base rate changes, with markets now pricing in a slower pace of cuts.

“If, as is still expected, downward moves in bank rate come into play later this year, fixed mortgage rates should fall.

Read Next

Mortgage rate uncertainty hits house prices as buyers hold back

Business

Mortgage rate uncertainty hits house prices as buyers hold back

Read More

“Combined with the resilience displayed by the housing market over recent months, we now expect property prices to rise modestly over the course of 2024.”

Northern Ireland saw the highest rise in house values, with prices up by 3.4 per cent on an annual basis in April, slowing from 4.1 per cent in March. Homes there now cost an average of £192,502.

In Wales annual property price growth slowed to 1.1 per cent in April, from 1.9 per cent in March, with the average home now costing £218,775.

Scottish house prices rose 1.5 per cent year-on-year to stand at £204,579.

In England, the North West saw the strongest growth, up 3.3 per cent annually to

Ј231,599.

Southern England saw prices fall as the North-South divide across English regions is sustained. Properties in Eastern England recorded the biggest decline of 1.1%, with homes selling for an average of £329,723, a drop of £3,541 over the last year.

London remains the most expensive region in the UK to buy a home, with an average price of

Ј539,336.

Sarah Coles, personal finance chief at Hargreaves Lansdown said: “Banks are pricing in the fact that the Bank of England’s cuts are expected later than they had hoped for earlier in 2024. In the South, prices tend to be higher – the priciest are in London.

“It means mortgages are bigger, and so higher rates hit harder. Buyers are having to wait, and hope that rates fall, in order to afford the kind of property they really want to live in – or lower their ambitions and buy somewhere they can bear to live with instead.”

Nathan Emerson, chief executive at Propertymark, the estate agency organisation, said: “Buyers and sellers are starting to accept the new reality of the housing market in the face of current interest rate levels, and it is encouraging to see that house prices are increasing, giving sellers the confidence they need to put their house onto the market during what will be a busy time for the housing market.

“Hopefully the UK Government takes the initiative and encourages growth in the housing market by meeting its own housing targets.”