The UK property market remains strong compared with pre-pandemic levels, with house prices continuing to be supported by high buyer demand.
The latest house price index from Halifax, which measures house prices based on mortgaged sales, shows that values rose by 2.9% in the year to February, leaving annual growth unchanged from January’s figures. This brings the average price of a home to £298,602.
The data does not take into account cash purchases – which have been reported to have increased over recent years due to rising mortgage rates – but presents a broad picture of housing market performance.
While the latest results from Halifax show a slight slow-down month-on-month, they are in contrast to Nationwide’s latest index which recorded price growth of 0.4% since the previous month.
A range of factors are influencing house prices at the moment. Buyer demand is strong, and more sellers have also been coming to market than this time last year, boosting overall transaction numbers. Upcoming stamp duty changes are also believed to have spurred on many buyers, keen to get their purchases over the line before the threshold changes and tax costs increase.
While mortgage rates are lower than they were this time last year, they haven’t dropped to the extent that many had hoped – although with most analysts expecting further interest rate cuts by the Bank of England over the course of this year, mortgage rates are expected to see further falls.
Housing market resilience
The UK property market is always varied across different locations when it comes to house prices and transactions, influenced by many of the factors above. When affordability is more stretched, for example, the more affordable pockets and property types tend to see greater acceleration.
The most resilient part of the housing market for some time, overall, has been the North of England, where prices have increased at the fastest rate over recent years. In Halifax’s latest research, Yorkshire and the Humber recorded the strongest house price growth in England, with a 4.1% rise. This brings the average property price in the region to £216,130.
UK-wide, Northern Ireland remains the strongest segment with a 5.9% annual price increase in February, according to Halifax. Meanwhile, London achieved annual growth in house prices of 1.6%, below the UK average. Properties there come in at £545,183, making it the most expensive place to buy.
House prices eased for first-time buyers
The research found that house prices for first-time buyers increased by an average of 2.4%, which is down on the previous month. This could be linked to the upcoming stamp duty change, which will see the threshold for first-time buyer relief lowered to £300,000, from its current level of £425,000.
By contrast, prices increased at a faster rate for home-movers, reaching an average of 3.7% annual growth. This indicates existing homeowners are still keen to move.
Stamp duty thresholds are set to change on 1st April. Once this comes into force, first-time buyers could find affordability even further stretched, and this could put more pressure on the private rented sector as prospective buyers put off plans until they can afford to get onto the housing ladder.
Mortgage rates are another factor influencing first-time buyers. Recent research from Rightmove revealed that a typical monthly mortgage payment on a first-time buyer property is £350 more than five years ago. A two-bedroom or smaller home now comes with average mortgage payments of £940 per month, compared with £590 in 2020.
While this is £155 cheaper than when rates hit their peak in 2023, it still puts affordability under the spotlight. While rental costs have also increased due to extremely high demand in the private rented sector, for many tenants it remains cheaper to rent than to buy – and this could be exacerbated by the stamp duty change.
