The UK’s housing market witnessed a continued surge in house prices for the third consecutive month in December, attributed to a scarcity of available properties, according to a report by Halifax. However, the mortgage giant forecasts a downward trajectory for prices in the coming year.
Halifax, the largest mortgage lender in Britain, announced a 1.1% surge in property prices for December. This follows a 0.6% rise in November and a substantial 1.2% increase in October, bringing the typical home value in the UK to £287,105, marking a modest increase of over £3,000 from November.
The sustained growth in monthly, quarterly, and yearly rates was predominantly propelled by a shortage of properties in the market rather than heightened buyer demand, Halifax clarified. Kim Kinnaird, the director of Halifax Mortgages, hinted at a potential boost in buyer confidence with the continuous easing of mortgage rates in the upcoming months.
Notably, this marks the first time in eight months that Halifax has reported annual growth in the UK housing market, with prices up by 1.7% year-on-year in December. Marc von Grundherr, director of the London-based Benham and Reeves estate agency, described the positive house price growth in December as a surprising development amidst the tumultuous year of 2023.
Despite the surge in mortgage approvals for house purchases to 50,100 in November (from 47,900 in October) indicating an uptick in demand, analysts from Goldman Sachs project a £19 billion increase in mortgage costs for UK homeowners as more fixed-rate deals expire, adding strain to household finances.
Halifax remains cautious, predicting a potential drop of 2% to 4% in the average UK property price this year. Kinnaird highlighted the ongoing uncertainties in the market due to high interest rates and inflation, factors likely to influence buyers’ and sellers’ cautious approach toward property transactions.
The Bank of England’s decision to hold interest rates steady at 5.25% for a third consecutive time in December, despite a decrease in the inflation rate to 3.9% in November, further underscores the cautious stance.
Notably, the south-east of England experienced the most significant downward pressure on house prices, with an average decline of 4.5% over the past year, as per Halifax’s findings. This regional disparity continues to shape the broader landscape of the UK housing market.
As 2024 progresses, Halifax anticipates that the property market will mirror the prevailing uncertainty, urging both buyers and sellers to approach transactions with prudence. While wage growth surpasses inflation, enhancing housing affordability for some, the persistence of elevated interest rates remains contingent on inflation remaining above the Bank of England’s target.
The intricate balance between supply, demand, inflation, and interest rates is likely to define the course of the UK housing market in the foreseeable future, as indicated by Halifax’s insights and industry projections.