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Slow Price Growth Could Help UK Buy-to-Let Investors

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    UK House Price Growth Subdued for Second Quarter in a Row

    Benham and Reeves, a London-based real estate agency, recently released their Property Market Index Review. It shows that in the last quarter of the previous year, house prices dropped by 0.6%. This decline marks the second consecutive quarter of negative growth in the UK and London housing markets.

    During this period, there was a narrowing gap between the prices sellers expected and buyers paid. This trend has occurred for the second time since 2022. It reflects how buyers and sellers adjust to higher mortgage rates to finalise sales.

    The Benham and Reeves Property Market Index Review collects quarterly data from the top four existing indices. This data offers a comprehensive overview of house price performance in the UK and London property market.

    The review considers average house prices by incorporating data from Halifax and Nationwide on mortgage-approved house prices, seller expectations from the Rightmove House Price Index, and sold prices from the UK House Price Index.

    Additionally, the review highlights market trends by analysing the gaps between asking prices and sold prices.

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      What Does the Data Say About Current Property Values?

      Benham and Reeves’ index indicates that the average house price in the UK was £302,912 in the fourth quarter of 2023. This reflects a 0.6% decrease compared to the previous quarter, marking the second consecutive quarter of negative growth.

      Annually, the average UK house price was 1.4% lower in Q4 2023 compared to Q4 2022. While this may not make for the most enticing reading for investors looking to sell, it does mean that good-value properties could be available. With prices expected to rise once interest rates come down later in the year, this could be the opportune time to look for buy-to-let investments and see significant capital growth relatively quickly.

      In London, the average house price in Q4 2023 stood at £563,459, showing a 0.9% decrease from the previous quarter. Similar to the national trend, this marks the second consecutive quarter of negative growth, with London house prices declining by 2.5% annually.

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      How Did the Experts React to the New-Build Price Growth Data?

      According to Benham and Reeves’ data, the difference between the average asking price and the average sold price in the UK has continued to decrease. This trend indicates that sellers are becoming more practical with their asking prices.

      In the UK overall, the average sold price in Q4 2023 was £283,285, 21.7% lower than the average asking price of £361,811. This marks the second consecutive quarter where the gap has narrowed, starting from Q4 2022.

      In London, the difference between the asking price and the sold price stands at -24%, showing an increase from the previous quarter when it narrowed for the first time in Q3 2022.

      Marc von Grundherr, director of Benham and Reeves, commented: “A further marginal cooling in house prices during the closing stages of last year was only to be expected given the ongoing headwinds of higher mortgage rates, which continued to dampen market activity on the buyer side of the market.

      “The good news is it looks as though buyers and sellers are coming to terms with this new normal of higher borrowing costs, with both parties seemingly more willing to meet in the middle to progress with their plans to move.

      “It will be interesting to see how the market performs over the year ahead, with mortgage market activity and house prices already starting to regain momentum. Such early signs of returning market health suggest that the gap between asking prices and selling prices could soon start to climb once again, as more buyers look to outbid each other for what stock is available on the market.”

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      Dale Barham

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      Dale is a property content writer at RWinvest. Keeping a close eye on the UK property market, Dale helps our readers stay informed and up to date on the latest market news and statistics.