UK House Prices Rebound After Six-Month Slide

The latest Halifax UK House Price Index shows that UK property prices increased in October for the first time in six months. A shortage of properties available to purchase is partly responsible for the monthly uptick.

Let’s look at the information in greater detail and see what it means for residential property investors.

Halifax House Price Index at a Glance

Halifax House Price Index at a Glance

• House prices rose by 1.1% on average in October
• In September, prices fell by 0.3%.
• The average UK home costs £281,974 on average
• Monthly price increase of £3,000
• South East England saw the largest decline in house prices
• Prices have dropped by 3.2% over the last year.
• North West prices are the most stable in England, experiencing the least significant price drop of any other English region.

According to the latest Halifax house price index, the average house price increased by 1.1% during October in the wake of a 0.3% drop in the previous month. In 2023, we witnessed consecutive average price drops between April and September.

Currently, Halifax’s average UK house price stands at £281,974, which is an increase of £3,000.

However, property prices are 3.2% lower than the previous year. That being said, September’s year-on-year price decline was 4.5%, suggesting that the annual price decline is edging towards bottoming out.

Take a look at our House Price Index UK by postcode for more information.

It is difficult to say why prices increased during October.

Halifax’s index noted a low supply of UK buy-to-let properties for sale, partly due to prospective sellers erring on the side of caution. This could have caused a short-term price increase, as buyer demand is still weak.

In addition, wage increases are rising faster than inflation, which could have improved buyer activity. However, higher interest rates and cost-of-living factors remain an issue for prospective buyers.

Kim Kinnaird, director of Halifax Mortgages, said:

‘Prospective sellers appear to be taking a cautious attitude, leading to a low supply of homes for sale. This is likely to have strengthened prices in the short term rather than prices being driven by buyer demand, which remains weak overall. While many people will have seen their income grow through wage rises, higher interest rates and wider affordability pressures continue to be challenges for buyers.’

The Halifax House Price Index follows hot on the heels of the Nationwide House Price Index.

Interestingly, the Nationwide House Price Index also shows a price increase for the month of October. According to those statistics, house prices rose by 0.9% during October, which was the biggest increase in over a year for Nationwide’s figures.

The Nationwide Index indicated that the average UK house price was £259,453.

Are these house price rises a short-term blip or a sign of things to come for the UK property market?

The key aspect affecting house prices in the UK is the cost-of-living crisis and higher interest rates. However, the Bank of England has halted interest rates for two months in a row. While inflation still sits at 6.7%, it is expected to fall in October and potentially drop below 4% by the middle of 2024. In addition, some forecasts predict the interest rate to fall to 4.75% by the end of 2024.

These predictions indicate that the UK economy will become more stable moving forward. With stability comes an incentive to spend in the housing market again. While supply may be down, the current stats will allow sellers to be more confident that they can achieve a better price for their property than they would have earlier this year. In addition, buyers may feel more confident in taking out mortgages for their property purchases.

Nicky Stevenson, managing director of Fine & Country, explains:

‘Steady buyer demand has helped to provide a cushion against month-on-month price falls, and the housing market remains in a relatively stable position. There are more promising signs ahead, thanks to the recent pauses in interest rate rises.

Many buyers searching for their next home need stability in the mortgage market so they can trust that their affordability won’t change substantially while they’re viewing properties — and the Bank of England has now provided that extra dose of confidence.’

Learn more about the basics of investment with our Complete Guide to Property Investment.

As activity in the market increases, property growth should follow suit.

However, both Halifax and Nationwide show a yearly decline in property prices, albeit a smaller decline than the year-on-year stats for September, which could suggest that the price slump will bottom out sooner rather than later.

If you are a buy-to-let investor, 2023/2024 could be the last time you see property prices as cheap as they are now.

With rental demand at an all-time high, investors can obtain higher-than-typical gross rental yields with the right property purchase.

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