House prices post biggest monthly rise in a year, says Nationwide

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House prices rose at their highest rate in a year in January, according to the latest figures from Nationwide.

Falling mortgage rates and growing buyer confidence that house prices will not collapse in the near future are helping to revive the property market, Britain’s largest housebuilding company has said.

Across the country, prices increased by 0.7% in the month of January, with the average property now costing £257,656, compared to £257,443 a month previously.

House prices fell by 0.2 percent annually in January 2024 – although this was an improvement on the 1.8 percent fall recorded in December.

Unexpected rise: National agency reported 0.7% increase in property prices, beating forecasts

Unexpected rise: National agency reported 0.7% increase in property prices, beating forecasts

The resilience of the housing market continues to surprise many analysts and January’s figures beat forecasts, with a Reuters poll of economists forecasting monthly growth of 0.1 percent and Capital Economics 0.4 percent.

Robert Gardner, the building society’s chief economist, said the rise in prices was mainly due to falling mortgage rates and more positive expectations for falling interest rates, but the outlook remained “highly uncertain “.

Gardner added: “While a rapid rebound in activity or house prices in 2024 seems unlikely, the outlook seems a little more positive.

“How mortgage rates move will be crucial, as affordability pressures have been the biggest factor dampening property market activity in 2023.”

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The real estate market has been relatively sluggish in recent months, with Rightmove reports that it took a seller 71 days to find a buyer in December, compared to 55 days on average in July.

However, this slower pace has presented an opportunity for some buyers.

Jonathan Hopper, CEO of estate agent Garrington Property Finders, said: “Prices are stabilizing in many areas, the number of homes coming to market is slowly increasing and we are seeing potential buyers who hesitated last year starting their property. seriously search.

With Nationwide’s latest data reinforcing the sentiment that prices have bottomed, a growing number of buyers have decided to act now before prices start to rise again.

The average property now costs £257,656, up from £257,443 a month ago.

The average property now costs £257,656, up from £257,443 a month ago.

On an annual basis, prices fell by 0.2% in January 2023 according to Nationwide

On an annual basis, prices fell by 0.2% in January 2023 according to Nationwide

Mortgage loans absorb more of take-home pay

Nationwide also said there had been a significant increase in mortgage payments as a percentage of average take-home pay.

By the end of 2023, it says, a borrower earning the UK average income and buying a typical first-time buyer property with a 20 per cent deposit would typically have to spend 38 per cent of their take-home pay on repayments. mortgages.

This figure was well above the long-term average of 30 percent.

If average mortgage rates were to fall from their current level of about 5.5 percent to 4 percent, Nationwide said, that percentage of take-home pay would decline to 34 percent.

To bring the average deposit down to 30 per cent, mortgage rates would need to rise to 3 per cent.

Andrew Wishart, senior economist at Capital Economics, said: “Even though the cost of the mortgage needed to buy the average house remains high by historical standards, the rise in house prices at the start of the year shows that the fall in mortgage rates has been sufficient. for house prices to generate further gains.

“Alongside improving public sentiment regarding the outlook for house prices according to YouGov, we are pleased with our above-consensus forecast that they will rise by 3% this year, reversing the 2.4% decline. in 2023.”

Nationwide highlights challenges for first-time buyers

Nationwide also said the typical 20 per cent deposit for a first-time buyer now equates to 105 per cent of their average annual gross income.

This figure is down from the all-time high of 116 percent recorded in 2022, but remains close to the pre-financial crisis level of 108 percent.

Real estate prices remain very high compared to income

“This reflects that house prices remain very high relative to profits, with the house price-to-earnings ratio standing at 5.2 at the end of 2023, well above the long-term average 3.9,” Gardner added.

This has led to more and more first-time buyers needing help from family and friends, or an inheritance, to put up a deposit.

In 2022/23, almost half of first-time buyers received help to put up a deposit, Nationwide said, compared to 27% in the mid-1990s.

The real estate price/profit ratio stood at 5.2 at the end of 2023

The real estate price/profit ratio stood at 5.2 at the end of 2023

Real estate transactions down in December, according to official figures

Home sales and purchases fell 18 percent in the year to December 2023, according to the latest data from HM Revenue & Customs.

Completed transactions ended the year at 1.02 million, which estate agent Savills said was 15% lower than the 2017-19 average.

On a monthly basis, transactions decreased by 1 percent compared to November 2023, falling to just over 80,000 on a seasonally adjusted basis.

This is the fourth consecutive month where they have recorded a decline. However, many real estate experts expect improvement in 2024.

Nick Leeming, chairman of estate agent Jackson-Stops, said: “Despite today’s figures showing a subdued final quarter of 2023, a seasonal slowdown is normal as celebration and reflection take priority in December.

“While last year was characterized by greater supply and hesitant buyer appetite, the cautious hope is that 2024 will mark a period of greater stability and predictability.

“Supported by falling inflation and competitive mortgage rates, a strong response from buyers to renew their searches and move forward with completions should also encourage sellers to put their properties back on the market at realistic guide prices. “

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