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A good time to buy? UK house price recovery sparks debate

UK house price trends continue to present a mixed – yet overall stable – picture to buyers. Whether you’re a homeowner or landlord, it can be difficult to know whether now is a good time to buy. 

For property investors and homebuyers alike, as well as tenants who hope to get onto the housing ladder soon, keeping an eye on house prices can be a useful indicator of the health of the market and help you decide when it’s a good time to buy. However, it is even more important to look at the broader picture, particularly for landlords considering buy-to-let.

The latest house price index released by Halifax shows a quarterly increase in values of 2%, with annual price growth of 0.3%. While this represents a slowdown on a yearly basis, while also showing a 1% month-on-month decrease, the general view is that this type of small correction did not come as a surprise in current market conditions.

Ongoing high mortgage rates, lower affordability among buyers, and indications that the Bank of England may not cut the base rate as much as anticipated are all factors that could hold the market back. And yet as Kim Kinnaird, director of Halifax Mortgages, pointed out, the UK housing market has shown “surprising resilience“.

Looking at the long-term

Homebuyers or movers deciding whether now is a good time to buy may be advised to focus on the longer-term view, rather than each monthly fluctuation.

“The broader picture is that house prices are up year-on-year, reflecting the opposing forces of an easing cost of living squeeze – now that pay growth is outpacing general inflation – and relatively high interest rates.

“Taking a slightly longer-term view, prices haven’t changed much over the past couple of years, moving in a narrow range since the spring of 2022, and are still almost £50,000 above pre-pandemic levels.”

Although some buyers are constrained by lack of affordability, there is plenty to show that the market is indeed continuing to move, with buyer appetite still high and transaction levels recovering from last year, showing many buyers have indeed decided that it is a good time to buy.

“Looking ahead, that trend is likely to continue,” noted Kinnaird. “Underlying demand is positive, as greater numbers of people buy homes, demonstrated by recent rises in mortgage approvals across the industry and underpinned by a strong labour market.

“And with rental costs rising at record rates, home ownership continues to be an attractive option for those who can make the sums work.

“However, the housing market remains sensitive to the scale and pace of interest rate changes, and with only a modest improvement in affordability on the horizon, this will likely limit the scope for significant house price increases this year.”

A good time to buy for landlords?

For property investors, there is a bigger picture that will influence the decision on whether now is a good time to buy. Alongside house prices, landlords need to be looking more closely at the rental market in which they operate or are considering investing, to ensure tenant demand is high.

Investors who still want to prioritise capital appreciation alongside strong rental yields can focus on the parts of the UK that are bucking the trend and have remained in growth throughout the last couple of years. This includes many parts of the north west, with Manchester and Liverpool in particular leading the way for house price growth.

However, some landlords may opt to try and capitalise on the areas that have seen a bigger slump in recent months, in the hope that they may secure a better price in the current market. Yasin Patel, co-founder of ethical investment specialists Autarky Sukuk, discusses this further.

He comments: “House price growth experienced a slight cooling in March, but annual prices are still at healthy levels considering the turbulence of last year.

“Inflation is proving a tricky beast to fight and this is prompting fears that the Bank of England will be much slower to lower interest rates, which keeps the cost of borrowing at more punitive levels.

“Landlords should be assured that now is a good time to buy. Slowing house price growth brings more opportunities to grab a bargain. With rent rates at record highs, the potential yield that investors can get on returns is still attractive.

“The next few months will be crucial for the industry, as the warmer months are typically some of the busiest in the calendar year. If we see this slowdown continue, we may need to be more realistic about how big the great property bounceback will be.”

If you’re a property investor trying to decide whether now is a good time to buy, speak to one of our property investment consultants, who can give you more details about how our current projects are performing. Staying up-to-date with the market can also help you choose a good time to buy.

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