UK housing market gains momentum at start of year

UK housing market gains momentum at start of year

LONDON — Average asking prices for British homes made the strongest start to the year since 2020, according to a Rightmove survey on Monday that added to signs that the slowdown in the sector could be easing as demand picked up in January.

The average price of homes put on sale between Dec. 3 and Jan. 6 was 1.3% higher than the month before, the biggest December to January rise since 2020 and more than double the average increase for this time of year, Rightmove said.

House prices in Britain typically pick up at the start of January after a lull in the run-up to Christmas.

“For now, the data at the start of 2024 points to building momentum, and reasons for growing market optimism,” Tim Bannister, director of property science at Rightmove, said.

Rightmove said the number of agreed sales was 20% higher in the first week of January compared to the same period last year, and buyer demand was up 5%. The number of homes coming to the market rose by 15%.

British house prices, like those in many other rich countries, surged during the COVID-19 pandemic, rising by more than 25% according to official data.

But transactions slowed sharply in late 2022 after then-Prime Minister Liz Truss’ budget plans caused turmoil in bond markets, which pushed up the cost of mortgages, while rising Bank of England rates acted as a brake through 2023.

Asking prices in Rightmove’s January period are still 0.7% lower than the year before.

Average mortgage rates have fallen, however, from a peak of 6.11% for a five-year fixed term in July 2023 to 4.86% now, Rightmove said.

Financial markets expect the Bank of England to start cutting rates from their current 15-year high of 5.25% in May.

Other indicators have also shown a rise in house prices. Britain’s biggest mortgage lender Halifax earlier this month reported a 1.1% monthly increase in prices in December and the first annual rise in eight months. 

That said, buyers were still likely to feel the squeeze from elevated mortgage rates and the cost-of-living crisis this year, Mr. Bannister said.

And while the housing market appears to be gaining momentum, Mr. Bannister said activity was likely to slow in the weeks leading up to the national election which Prime Minister Rishi Sunak has suggested will be held in the second half of this year. — Reuters