Halifax House Price Index: UK Housing Market is Regaining its Footing

After three consecutive months of growth, the average UK house price fell in April, down by -0.3% or around £1,000 over the month.

The rate of annual house price inflation also slowed further to +0.1%, from +1.6% in March, meaning average property prices are largely unchanged from this time last year.

A typical property now costs £286,896, which is around £7,000 below last summer’s peak, though still some £28,000 higher than two years ago.

House price movements over recent months have largely mirrored the short-term volatility seen in borrowing costs.

The sharp fall in prices we saw at the end of last year after September’s ‘mini-budget’ preceded something of a rebound in the first quarter of this year as economic conditions improved.

The economy has proven to be resilient, with a robust labour market and consumer price inflation predicted to decelerate sharply in the coming months.

Mortgage rates are now stabilising, and though they remain well above the average of recent years, this gives important certainty to would-be buyers, commented Kim Kinnaird, Director, Halifax Mortgages.

Kinnaird continued, while the housing market as a whole remains subdued, the number of properties for sale is also slowly increasing, as sellers adapt to market conditions.

Alongside a market-wide uptick in mortgage approvals, these latest figures may indicate a more steady environment.

However, cost of living concerns remain real for many households, which will likely continue weigh, on sentiment and activity.

Combined with the impact of higher interest rates gradually feeding through to those re-mortgaging their current fixed-rate deals, we should expect some further downward pressure on house prices over course of this year.

Property and buyer types

Existing property prices have fallen by -0.6% over the last year.

In contrast new-build house prices continue to provide some support to the wider market, rising by +3.5% year-on-year.

The first-time buyer market is also proving to be more resilient, with average property prices up +0.7% over the last year, compared to a fall of -0.1% for home movers.

One factor behind this difference may be that with rents continuing to rise sharply, it’s becoming increasingly cost effective to purchase a home, despite the challenge of raising a deposit and higher mortgage borrowing costs.

Nations and regions house prices

There’s an increasingly mixed picture emerging for house prices across the UK.

The four regions of southern England have seen average house prices fall over the last year, with the South East registering the largest dip (-0.6%, average house price of £387,469).

Typically, it’s these regions (including Greater London, Eastern England and the South West) where buyers face the most expensive average property prices, and therefore the biggest impact of higher borrowing costs.

London continues to have the costliest homes of anywhere in the country at an average of £538,409 (annual rate of growth now -0.2%).

Elsewhere all other regions and nations across the UK saw the rate of annual property price inflation remain in positive territory during April.

The West Midlands posted the strongest annual growth of +3.1% (average property price of £249,554).

Northern Ireland (+2.7%, £186,846), Scotland (+2.2%, £201,489) and Wales (+1.0%, £216,559) have also seen average property prices increase year-on-year.

HMRC monthly property transaction data shows UK home sales increased in March 2023.

UK seasonally adjusted (SA) residential transactions in March 2023 totalled 89,560 – up by 1.3% from February’s figure of 88,380 (up 26.2% on a non-SA basis).

Quarterly SA transactions (January 2023-March 2023) were approximately 10.2% lower than the preceding three months (October 2022 – December 2022).

Year-on-year SA transactions were 18.9% lower than March 2022 (13.6% lower on a non-SA basis). (Source: HMRC)

Latest Bank of England figures show the number of mortgages approved to finance house purchases increased in March 2023, by 17.9% to 52,011.

Year-on-year the March figure was 25.5% below March 2022. (Source: Bank of England, seasonally-adjusted figures)

The March 2023 RICS Residential Market Survey results continue to show a subdued market.

New buyer enquiries returned a net balance of -29%, up from -30% previously.

Agreed sales had a net balance of -31% (-25% previously) and new instructions returned a net balance of -6% (previously -4%). (Source: Royal Institution of Chartered Surveyors’ (RICS) monthly report)

Jeremy Leaf, north London estate agent and a former RICS residential chairman, comments:

“Contrary to other recent housing market surveys, these figures show we cannot be complacent about recovery as cost-of-living and mortgage worries persist, which are making buyers cautious about longer-term commitments unless they see real value.

However, there is no doubt that we are much busier than we were a few months ago and the underlying feeling is that we are over the worst and will continue on a relatively even keel despite some ups and downs along the way.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, comments:

“The recent rise in Swap rates, which underpin the pricing of fixed-rate mortgages, has resulted in lenders removing their market-leading lower loan-to-value products, with the main players increasing pricing by 30 basis points.

However, Swaps have since plateaued and have been edging downwards again so if this trend continues, we expect to see a return of five-year fixes at sub-4 per cent, which will be a boost to buyers.

First-time buyer numbers continue to prove resilient and with lenders returning to higher loan-to-value products, this will assist those struggling o get on the housing ladder.”

Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, comments:

“The Halifax snapshot has again demonstrated how higher rates are continuing to weigh on UK house prices, which were down 0.3% in April, with the lender expecting fresh falls in the months to come.

This should come as a warning light for first time buyers tempted by the new 100% mortgage deals back on the market.

Although building up a deposit seems so out of reach right now for generation rent given the painful level of monthly payments, there is risk they jump in too high on the housing ladder, only to see prices fall.

Watching the property you live in fall in value while the loan borrowed stays the same is not a pleasant negative equity trap to be in, so such deals are still likely to be treated with caution.”

Avinav Nigam, cofounder of real estate investment platform, IMMO, comments:

“The relative stabilisation of borrowing costs and inflation brings some relief to buyers, with house prices fluctuating slightly month-on-month.

While this is good news for first-time buyers, the UK still sees a vast population of renters with few adequate housing options, and no viable path to home ownership.

In what is clearly a stable, but inaccessible housing market, there’s a growing need for professional investors to inject capital into the market, create new rental homes, and improve the energy performance of existing housing.”

Tomer Aboody, director of property lender MT Finance, comments:

“Transaction numbers have improved as prices have slightly dipped, suggesting more confidence from buyers, while sellers are either pricing more realistically or accepting lower offers.

With mortgage rates still volatile, although nothing like what they were in the aftermath of the mini budget, buyers are cautious before committing.

First-time buyer purchases are up, coinciding with sharp increases in rents, as the realisation of the benefits of owning over renting gives them the push to take the plunge.”