Halifax House Price Index reveals upward movement in house prices in July
The Halifax House Price Index for July shows a rise in house prices of +0.8% following three months of little significant movement. An increase of +2.3% in the annual growth rate has instilled a general air of positivity into a previously sluggish UK property market coping with high interest rates and general election uncertainty.
The latest Halifax figures also reveal an increase of more than £2,200 in the average cost of a property when compared with June. Promisingly, Halifax Head of Mortgages, Amanda Bryden, forecasts a moderate upward trajectory for the rest of 2024 following this initial property market boost.
She commented,
“Last week’s Bank of England’s Base Rate cut, which follows recent reductions in mortgage rates, is encouraging for those looking to remortgage, purchase a first home or move along the housing ladder.”
“Against the backdrop of lower mortgage rates and potential further Base Rate reductions, we anticipate house prices to continue a modest upward trend throughout the remainder of this year.”
So where is this trend most visible in the UK?
Northern Ireland sees the most significant annual house price rises
The highest annual growth rate of all the UK nations and regions is in Northern Ireland, according to Halifax’s House Price Index, rising to +5.8% in July from +4.1% in June. This is reportedly the highest increase since February 2023.
Other regions experiencing high annual housing market growth are the North West and Wales, where house prices rose by +4.1% and +3.4% respectively. In Scotland, a typical property costs £205,264, representing an improvement of +2.1% in comparison with the previous year.
Unsurprisingly, London still has the highest property prices in the UK with a typical property in the capital costing £536,052 on average. Compared with some other areas of the country, however, this year the city has experienced a small annual growth increase of +1.2%.
Eastern England is the only region where annual property prices have fallen. They are down by -0.4% but the area may experience an uplift in due course if the boost to the housing market as a whole continues.
UK house prices fell dramatically following Liz Truss’s now notorious mini-budget in September 2022 and they have struggled to return to the highs achieved up until August of that year. So what is fuelling the current housing market upturn?
What is behind this property market boost?
Interest rate cuts
The recent Bank of England base rate cut from 5.25% to 5% – the first reduction since March 2020 – prompted a flurry of sub-4% mortgage rate offers from lenders. Several deals had already been introduced to the market in anticipation of the cut.
The inherently competitive nature of the mortgage market means that some purchasers may now be able to access rates unseen for some time if they can provide the level of deposit required by their lender.
Although affordability does remain an issue for many potential buyers, the drive to attract new mortgage customers can only be good news for those wishing to move along the property ladder at some point this year.
Disappearance of election uncertainty
Economic and political uncertainty can plague the housing market during a general election period and encourage a ‘put it on hold’ strategy by homeowners reluctant to risk losing money on what is typically their largest asset.
Labour’s definitive election win has created some stability, however, and the property market is buoyed by suggestions of further interest rate cuts by the Bank of England later this year.
The promise of more growth in the months to come may inject long-lasting and steady improvements in house prices and transaction volumes, especially if the government can deal with the ongoing cost of living crisis.
What does the future hold for the UK property market?
Nicky Stevenson, managing director of the estate agent group, Fine and Country, commented to IFA Magazine on whether the Labour government might get to grips with market volatility,
“Further buoyancy in the housing market is expected once the political climate settles. It is going to be very interesting to see how the new Labour government injects some fresh thinking into the industry, following several years of dramatic ups and downs in house prices and property transactions.”
Interest rates are a key driver of the property market but the Bank of England needs to carefully monitor inflation in 2024 and beyond as this is linked to interest rates. A cautious approach to cutting the base rate has been discussed, which could lead to slightly slower than anticipated growth in the property market.
Bank of England Governor, Andrew Bailey, explained,
“We have to be careful not to cut interest rates too much or too quickly. Over the coming years, we need to make sure that inflation will continue to stay low. The best contribution the Bank can make to support economic growth and people’s prosperity is by making sure we have low and stable inflation.”
https://www.halifax.co.uk/assets/pdf/july-2024-halifax-house-price-index.pdf
https://ifamagazine.com/will-labours-election-landslide-mean-a-new-dawn-for-the-uk-property-market-experts-share-reaction/ (bottom of the page)
https://www.bankofengland.co.uk/monetary-policy-report/2024/august-2024