House prices increase 0.7% between December and January

House prices in the UK increased by 0.7% between December 2023 and January 2024, the Nationwide house price index (HPI) has revealed.

The average house price in the UK now stands at £257,656, a £213 increase month-on-month.

The increase follows on from no change between November and December, with prices falling year-on-year by 0.2% in January.

Although there is a drop in annual rates, Nationwide suggested this is a recovery compared to previous months.

Chief economist at Nationwide, Robert Gardner, said: "While a rapid rebound in activity or house prices in 2024 appears unlikely, the outlook is looking a little more positive. The most recent RICS survey suggests the decline in new buyer enquiries has halted, while there are tentative signs of a pickup in the number of properties coming onto the market.

"How mortgage rates evolve will be crucial, as affordability pressures were the key factor holding back housing market activity in 2023. Indeed, at the end of 2023, a borrower earning the average UK income and buying a typical first-time buyer property with a 20% deposit had a monthly mortgage payment equivalent to 38% of take-home pay – well above the long run average of 30%."

The HPI recorded considerable variation in affordability across the country, with pressures particularly acute in London, the South of England and East Anglia.

Scotland and the North continue to be the most affordable regions, with mortgage payments as a share of take-home pay being much closer to their long run average.

The variations have led to stark differences between those who would like to buy and those who are actually available to do so.

Nationwide said this is most pronounced in London, where the average income of actual first-time- buyers (for a single borrower) is around 55% higher than the average income in the capital for a full-time worker.

However, in Yorkshire and the Humber and the North East, incomes of first-time buyers are as broadly similar to average regional incomes, meaning that affordability of homes is less stretched.

Personal finance analyst at Bestinvest, Alice Haine, added: "The housing market has kicked off 2024 with a rise in demand and sales agreed as buyers and sellers return buoyed by improving conditions. Better rates and softening inflation may be easing the affordability crunch for some but while mortgage approvals – a sign of future borrowing – edged up in December, overall mortgage lending remains subdued indicating that smaller, cheaper homes may now take preference over larger, more expensive properties.

"More properties may be hitting the market, with the number of available homes up by just over a fifth in January compared to a year ago. While an uplift in listings is positive, it won’t necessarily translate into a rise in house prices as a fifth of sellers are still willing to accept more than 10 per cent off the asking price to get a sale across the line.

"Cutting asking prices to secure buyer interest will remain a key trend in the first few months of 2024 making it imperative that buyers negotiate hard on price. Whether that will change as the year goes on will depend on how quickly the Bank of England cuts interest rates."

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