(Commonwealth) _ In April, house prices in the UK stabilized following a decline in March, driven partly by higher mortgage rates prompting first-time buyers to opt for smaller properties, as per Halifax, a mortgage lender. The average home price increased marginally by less than £200 to £288,949, marking a 0.1% monthly gain compared to March’s 0.9% drop, the first in six months. On an annual basis, prices rose by 1.1% in April, up from March’s 0.4%, largely due to weaker growth last year, noted Halifax.
Amanda Bryden, who serves as the head of mortgages at Halifax, highlighted that the average house prices in early 2024 had reached a plateau, signaling the housing market’s adjustment to elevated interest rates. Although borrowing expenses persist at elevated levels compared to previous years, buyers are finding reassurance in the market’s relative stability. Bryden’s assessment underscores the resilience of buyers amidst evolving economic conditions, suggesting a cautious optimism prevailing despite the challenges posed by increased borrowing costs.
Bryden noted a discernible trend among buyers, particularly first-time ones, adapting to higher borrowing costs by gravitating towards smaller properties. This adjustment is reflected in property price dynamics, notably with a notable surge in flat prices during the initial months of 2024. Consequently, this trend has led to a narrowing of the growth disparity between smaller and larger properties observed over the past four years. Such shifts in buyer preferences underscore the market’s response to economic conditions, with buyers strategically navigating affordability challenges by opting for more modest housing options.
While activity and demand are on the rise, affordability remains a concern for first-time buyers and those exiting fixed-term mortgage deals. Mortgage rates have risen in recent weeks, with markets pricing in a slower pace of interest rate cuts from the Bank of England. Current rates stand at 5.93% for a two-year fixed residential mortgage and 5.5% for a five-year fix, compared to 5.78% and 5.34% respectively two months ago, according to Moneyfacts.
Bryden anticipates a modest rise in property prices throughout 2024, especially if expected downward moves in the Bank rate materialize, leading to lower fixed mortgage rates. Property firm Savills has revised its earlier prediction of a fall in UK house prices, now expecting a 2.5% increase in 2024, contrasting with its November forecast. Jeremy Leaf, a north London estate agent, notes fluctuations in house prices but underscores underlying confidence in the market. He suggests that while momentum has waned slightly due to modest increases in mortgage rates and listings, confidence remains robust.
In addition, separate survey results revealed a surge in UK construction output in April, reaching its highest level in over a year, despite subdued performance by housebuilders. S&P Global’s health check attributed the drop in housebuilding to weak demand and high borrowing costs but noted strong performance in commercial and civil engineering segments. The construction sector’s purchasing managers index rose to 53.0 in April, the highest since February 2023, indicating growing output.
Tim Moore, the economics director at S&P Global, emphasized the construction sector’s consistent expansion, fueled by rising order books and heightened demand amid a more favorable economic outlook. Despite economic uncertainties, the UK housing market demonstrates resilience, with price fluctuations indicating adaptations to increased borrowing expenses. As the market responds to evolving dynamics such as interest rate fluctuations and shifts in demand, stakeholders maintain a cautious yet optimistic outlook regarding the sector’s trajectory in the forthcoming months. The ability of the market to withstand challenges and adapt to changing conditions underscores its underlying strength and potential for sustained growth in the face of ongoing uncertainties.
