The housing market in the United Kingdom is a fluid one, with everything from political influence to social changes and general country-wide events affecting the amount that you can expect to pay or receive for a property. Recently, however, the housing market has continued to defy expectations, with average house prices reaching their second-highest level ever in August 2024. This surge, as reported by the Halifax House Price Index, reflects a combination of factors, including low interest rates, limited housing supply, and a growing demand for property.
We’re taking a closer look at how the Halifax House Price Index has changed recently, and what has led to such a high average rate.
The Halifax House Price Index
The Halifax House Price Index is a leading indicator of the UK housing market and how it is currently performing. It is the longest-running monthly house price series that provides data covering the whole of the country, as far back as the early 1908’s.
Their most recent edition has revealed that average house prices increased by 0.7% in August 2024 compared to the previous month. This growth pushed the national average to a new peak, just shy of the record high set in 2021. While the pace of price rises has slowed slightly from earlier in the year, the overall upward trend remains firmly in place and we could see further increases in the coming months.
Factors Driving the Market
Several key factors always contribute to how house prices perform at any one time, ranging from interest rates and demand to the amount of available housing and political or social issues. In this particular case, the key factors that have contributed to the sustained growth in UK house prices include:
- Mortgage Dynamics: The resilience of the housing market could in part be due to the growing levels of buyer confidence when it comes to getting mortgages and the changing interest rates. With the interest rates beginning to come down, mortgage approvals are going up, and market activity is picking up as a result. We are seeing an approximately 26.5% rise in mortgage approvals compared to the same period last year.
- Limited Housing Supply: A chronic shortage of affordable new homes, particularly in desirable areas, has created a difficult market but one that sellers can benefit from. This imbalance between supply and demand has made it possible for those selling a property to ask for higher prices as a result.
- Growing Demand: The UK population continues to increase, and there is a growing demand for housing, both for first-time buyers and for those looking to upsize or downsize. This rising demand has put upward pressure on prices.
Regional Variations
While the national average house price has reached a new high, there are significant regional variations across the UK. This has been the case for a long time, but we’re seeing a difference more than ever in today’s housing market.
London, the South East, and the East of England continue to be the most expensive areas, with average house prices well above the national average. This may be due to an increased demand for properties in the area in particular, as more and more people aim to be close to the capital. However, other regions, such as the North and the Midlands, have also seen strong price growth in recent years, though they still sit lower than London and the South East.
Implications for Homeowners and Landlords
The rising cost of housing has both positive and negative implications for homeowners and landlords. On the one hand, homeowners who have owned their property for a long time may see their equity increase significantly. This can provide a financial cushion and potentially enable them to downsize or invest in other assets. However, for first-time buyers and those looking to move, the rising cost of housing can be a major challenge. The dream of owning a home may seem increasingly out of reach for many people.
Landlords may also face a struggle in the coming months, with increased costs associated with property management, maintenance, and insurance. With rent prices increasing, finding stable tenants can be more of a struggle, so it’s important to make sure that you are adequately protected with Landlords Insurance, to not only ensure you remain financially protected but can stand out from competitors in the market.
The Outlook for the Housing Market
Predicting the future of the housing market is always difficult, and several factors could influence the market’s direction. If interest rates were to rise significantly, it could dampen demand and put downward pressure on prices. Similarly, if the government were to take steps to increase the supply of housing, it could help to moderate price growth.
Overall, the UK housing market remains buoyant, with average house prices at a record high. While there are challenges ahead, the underlying fundamentals of the market are strong, and prices will likely continue to rise in the years to come.
For Landlords, we are on hand to help find the right insurance policy for you and your property portfolio. Get in touch with Ashburnham Insurance to discuss your options, or to get your bespoke quote.