Landlords seeking capital appreciation can derive encouragement from the insights provided by two recent housing market surveys. The first piece of noteworthy information comes from Halifax, indicating a surprising 2.5% year-on-year increase in UK house prices for January. This figure represents the highest annual growth rate observed since January 2023, presenting an unexpected uptick in property values that sets an optimistic tone for potential future gains in the housing market.
The Halifax report suggests a resilience in the property market, defying expectations and offering landlords a positive outlook. This upward trajectory in house prices not only reflects current market dynamics but also positions property as a potentially lucrative investment for those eyeing long-term capital appreciation. As landlords navigate the evolving landscape, this unexpected rise serves as a valuable indicator, prompting a closer examination of market conditions and potential opportunities for strategic property investments.
The latest index reveals that the average house price in the previous month stood at £291,029, marking a rise of £3,924 or 1.3% from December 2023. This consistent upward trend over the past four months is attributed to the appeal of more favorable mortgage rates and a gradual decline in inflation, enticing a growing number of individuals into the property market.
Despite the increased housing activity, elevated interest rates, in comparison to recent historic lows, and a persistent demand that surpasses available supply, continue to shape the market dynamics. Kim Kinnaird, the director of Halifax Mortgages, notes the challenges faced by first-time homebuyers, with the average deposit now reaching £53,414, constituting around 19% of the purchase price. Notably, a shift is observed in buyer behavior, as almost two-thirds of new entrants onto the property ladder are opting for joint purchases.
In response to the Halifax data, Marc von Grundherr, a lettings expert and director of the Benham and Reeves agency, observes early signs of a more promising year for the UK property market. With a fourth consecutive monthly rise in house prices and a significant uptick in new sales listings and buyer offers, the market is showing robust activity, leading to a positive outlook for property values.
Verona Frankish, the chief executive of online agency Yopa, emphasizes the positive trajectory in both monthly and annual house price growth. This improvement in the market’s overall health indicates a strong upward trend. Looking forward, there’s a likelihood that the property market has not only stabilized from the decline witnessed last year but also that interest rates have reached their peak.
The latest RICS UK Residential Market Survey brings encouraging developments, highlighting improvements in key metrics. Notably, the outlook for sales volumes in the next 12 months has seen positive shifts, influenced by expectations of future interest rate cuts by the Bank of England. The sentiment survey reveals a positive shift in responses regarding new buyer enquiries, reaching a positive seven per cent in January. This marks the strongest demand since February 2022 and suggests a gradual recovery in buyer demand. Additionally, agreed sales experienced a positive shift from negative five per cent to positive five per cent, indicating a more optimistic outlook.
Furthermore, respondents foresee an uptick in sales over the next three months, with a positive 14 per cent expressing belief in upcoming rises. Looking ahead, there is a significant positive outlook for the next 12 months, with 44 per cent anticipating increased sales volumes. This data reflects a growing sense of confidence in the market, signaling positive trends that align with the expectations of a more fruitful year for the UK property market. The improved sentiment and positive expectations underscore a potential upward trajectory for housing activity in the coming months.
In the lettings sector, a positive 28 per cent of contributors noted a rise in tenant demand in the three months leading up to January. However, this increase was the most modest since January 2021. Simultaneously, respondents observed a decrease in the volume of new landlord instructions, maintaining a net balance at negative 18 per cent for the second consecutive quarter. The ongoing imbalance between supply and demand is anticipated to exert upward pressure on rental prices in the coming months. Despite a slight easing to positive 41 per cent, down from previous readings of positive 52 and positive 61 per cent, the expectation for rising rental prices persists.
Tarrant Parsons, RICS senior economist, comments on the evolving landscape: “The UK housing market continues to witness a sustained uptick in buyer activity, fueled by the recent reduction in mortgage interest rates. Although sales volumes are expected to remain relatively subdued in the upcoming months compared to long-term averages, the outlook has consistently brightened in recent survey reports.”
“However, this is not to say that mortgage affordability isn’t still a significant challenge, and any further unwelcome surprises with regards to inflation may still cause interest rate expectations to be revised. That would then pose a significant risk to any prospective recovery in the months ahead, even if the current prognosis is for the market to see a further pick-up in activity levels.”