UK house prices: Three key data points for the property market

There have been early signs of improvement in UK housing market activity, but a step down in average house prices has kept any enthusiasm in check.

“The housing market right now is as reliable as the spring weather. You might set out with expectations of sunny skies, and walk straight into a rain storm,” said Sarah Coles, head of personal finance, Hargreaves Lansdown.

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In this article, we examine three key UK housing market data points and assess the outlook for the property market.

March 2024 RICS UK Residential Survey

The March 2024 RICS UK Residential Survey had some tangible sources of optimism. The survey of Chartered Surveyors found a net 8% increase in buyer enquiries, up from 4% increase in the last month.

However, this is yet to filter through into sales with net sales down 5%.

“Overall, there are some real positives. More upbeat sentiment and expectations of rate cuts are persuading buyers and sellers back to the market in increasing numbers. They’re not yet rushing to agree sales or push prices up, but agents are confident that this is on the way once the weather cheers up and mortgage rates fall,” said Sarah Coles, head of personal finance, Hargreaves Lansdown.

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“There are some negatives too. Agents across the country say that while buyers are back, demand is fragile, buyers are prone to changing their mind, and chains are still collapsing. Others say that the resurgence of supply means overpriced properties aren’t selling, and that buyers are driving a hard bargain.”

Bank of England Credit Conditions

The UK housing market has been remarkably resilient in the face of economic pressures. However, Bank of England’s latest Credit Conditions Survey paints a mixed picture, says Aaron Milburn, UK Managing Director at credit intelligence provider Pepper Advantage.

The bank’s survey of lenders found that default rates for mortgages and credit cards are up and are expected to rise further in the coming months.

“The continued boost to mortgage approvals is a cause for optimism; however, underlying pressures driven by stubborn inflation remain and are prolonging uncertainty, with mortgage default rates increasing. While some negative indicators appear to be plateauing, budgetary stress on borrowers remains high and is not necessarily spread evenly across regions and demographics, with some feeling debt pressures more strongly than others,” Aaron Milburn said.

“Though borrowing demand may be increasing, lenders will proceed cautiously. Some areas of the economy, such as services inflation, are still running hot – raising the prospects of higher rates for longer and extending the financial pressure on borrowers.”

Halifax House Price Index March

The Halifax House Price Index showed a respectable increase in the average UK house price over the last quarter, but there were signs of a wobble with a 1% drop in March month-on-month

“UK house prices grew in March on a quarterly basis, by +2.0%, with annual growth slowing to +0.3%, from 1.6% in February. Compared to last month, the price of a UK property fell -1.0% or £2,908 in cash terms, with the average property now costing £288,430,” said Kim Kinnaird, Director, Halifax Mortgages.

“That a monthly fall should occur following five consecutive months of growth is not entirely unexpected particularly in view of the reset the market has been going through since interest rates began to rise sharply in 2022. Despite this house prices have shown surprising resilience in the face of significantly higher borrowing costs.”

“Affordability constraints continue to be a challenge for prospective buyers, while existing homeowners on cheaper fixed-term deals are yet to feel the full effect of higher interest rates. This means the housing market is still to fully adjust, with sellers likely to be pricing their properties accordingly.”

Like the Nationwide average house price methodology, Halifax’s data has limitations, and it is important to look for trends across all indicators for a clear picture.

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