House prices in the UK rose by 0.3% in September, marking a 4.7% increase over the past year – the fastest annual growth since November 2022, according to Halifax’s latest House Price Index. The average house price now stands at £293,399, inching closer to the peak of the post-pandemic boom. However, affordability concerns and an influx of properties for sale may weigh on future growth.
Market resurgence as mortgage rates ease
The property market has shown signs of recovery following the difficulties of 2023, driven by a reduction in mortgage rates. Halifax’s report indicates that the typical first-time buyer property price has risen to £232,769. The North West has experienced the strongest regional growth in England, with house prices up 5.1%, while London remains the most expensive area, with an average price of £539,238, despite being £13,354 below its peak.
Sarah Coles, head of personal finance at Hargreaves Lansdown, commented: “The property market continues its relentless trudge back to the summit it scaled at the peak of the post-pandemic boom in June 2022. Mortgage rate cuts have enthused buyers, despite the fact property has become so expensive. The average 2-year fixed rate mortgage has fallen from 5.77% two months ago to 5.38%, which is helping to boost buyer confidence.”
Challenges for first-time buyers
While the property market is showing resilience, rising house prices continue to pose a challenge for first-time buyers. According to Coles, “First-time buyers are still paying around £1,000 less than the peak, but the typical property price is up 4.2% in a year – or £9,409. Having a robust deposit makes all the difference, but with rents rocketing, saving for a deposit is increasingly difficult.”
The potential end of stamp duty relief for first-time buyers next year has sparked concerns. Guy Gittins, CEO of Foxtons, said: “If the government reduces the stamp duty threshold, it will only make affordability harder. We would urge the government to really consider that move.”
Future outlook and market resilience
The UK property market is expected to face further challenges, with increasing numbers of properties hitting the market due to concerns over potential capital gains tax changes in the Autumn Budget. Zoopla’s figures show that properties up for sale have risen by 12%, with a notable number of former rental and holiday homes being listed.
Daniel Austin, CEO and co-founder at ASK Partners, believes the market remains resilient: “We are continuing to see a consistent month-on-month rise in house prices, which signals a potential upward trend for the remainder of the year. The market is showing strong signs of resilience, even amid broader uncertainties.”
As mortgage rates continue to fall, buyer confidence is expected to rise further, but affordability will remain a key issue for many prospective homeowners. Investors and developers are keeping a close eye on the upcoming Budget, hoping for initiatives to stimulate the housing sector and drive growth.
The road ahead for investors
For landlords and property investors, the market continues to offer opportunities despite broader economic challenges. Austin noted: “Rent values have seen sustained growth, positioning real estate as reasonably valued in comparison to gilts and presenting growth potential. As a debt provider, we aim to support well-capitalised borrowers looking at prime sites with the potential to add asset value.”
With mortgage rates showing signs of stabilisation and government intervention anticipated in the housing sector, the UK property market may see a gradual recovery, but the challenges of affordability and potential tax changes will need to be navigated carefully.
