UK House Prices Rise Despite Market Challenges

UK house prices recorded a third consecutive monthly increase in December, attributed to a scarcity of available properties, as stated by Halifax. The country's largest mortgage lender, which recently participated in new year rate adjustments, reported a 1.1% growth in property prices for December, following a 0.6% rise in November and a 1.2% surge in October. The average UK home is now valued at £287,105, approximately £3,000 more than in November.

Despite the positive growth rates, Halifax clarified that the scarcity of properties, rather than robust buyer demand, drove the monthly, quarterly, and annual increases. Kim Kinnaird, the director of Halifax Mortgages, mentioned that the easing of mortgage rates might boost buyer confidence in the upcoming months.

This marks the first time in eight months that Halifax has reported annual growth in the UK housing market, with prices rising by 1.7% year on year in December. However, Halifax anticipates a potential decline of up to 4% in house prices this year due to high interest rates and inflation affecting mortgage affordability.

Although the Bank of England reported an increase in mortgage approvals for house purchases, analysts at Goldman Sachs estimate that UK homeowners could face a £19 billion rise in mortgage costs by the end of the next year. Halifax, despite the recent mortgage rate cuts by major lenders, maintains its projection of a 2-4% decrease in the average UK property price this year.

Halifax attributes growth rates to a market shortage, with the average home valued at £287,105.

Kinnaird emphasised that as the UK property market navigates the uncertainties of 2024, caution is likely to prevail among buyers and sellers. While wage growth has surpassed inflation, easing some cost-of-living pressures and improving housing affordability, elevated interest rates are expected to persist as long as inflation remains notably above the Bank of England's target.

Halifax highlighted the south-east of England as experiencing the most downward pressure on house prices, with a 4.5% average decrease over the last year. London maintains the highest average house price at £528,798, though prices have declined by 2.3% annually. In contrast, Northern Ireland stands out as the strongest-performing region, with a 4.1% annual increase, resulting in an average property cost of £192,153.

Industry observers cautiously note positive signs in the property market, citing a perception of a turning point and indicate that strategic buyers who paused plans during the previous year are reportedly reentering the market, contributing to stabilising prices.

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