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UK house prices see ‘welcome’ rise in November but ‘too early to talk about recovery’

UK house prices see ‘welcome’ rise in November but ‘too early to talk about recovery’
Shekina Tuahene
Written By:
Shekina Tuahene
Posted:
01/12/2023
Updated:
01/12/2023

Average house prices in the UK rose 0.2% to £258,557 from October to November, an index has shown.

The Nationwide house price index revealed that annually, values were down by 2% compared to last year which was a softer decline than the 3.3% yearly drop seen in October. 

Although a decline was recorded, Nationwide said this was the strongest annual growth since February this year. 

Rate stability brings confidence the market 

The 5.25% base rate hold created stability and instilled confidence, as Robert Gardner, chief economist at Nationwide, said the change in market expectations for the future base rate could offer “much needed support for housing market activity”. 

He added: “In mid-August, investors had expected the Bank of England to raise rates to a peak of around6% and lower them only modestly (to circa 4%) over the next five years. By the end of November, this had shifted to a view that rates have now peaked (at 5.25%) and that they will be lowered to around 3.5% in the years ahead. 

“These shifts are important as they have led to a decline in the longer-term interest rates (swap rates) that underpin fixed rate mortgage pricing, as shown below. If sustained, this will help to ease the affordability pressures that have been stifling housing market activity in recent quarters, where the number of mortgage approvals for house purchases has been running at c.30% below pre-pandemic levels. 

“While mortgage rates are unlikely to return to the lows prevailing in the aftermath of the pandemic, modestly lower borrowing costs, together with solid rates of income growth and weak/negative house price growth, should help underpin a modest rise in activity in the quarters ahead.” 

Too soon to call a recovery 

Although a monthly rise in prices occurred, industry commentators said it may be too soon so suggest the market was rebounding. 

Jonathan Hopper, CEO of Garrington Property Finders, said: “All the property market wants for Christmas is stability – and on this evidence, it might just get it. 

“But the progress is tentative and it’s too soon to talk of a recovery, let alone a rebound. The market remains highly polarised with wide variations depending on price point and location.” 

Hopper said even though homes were coming onto the market, transaction levels were still low. 

“However, sentiment is improving and previously hesitant buyers are coming off the fence, encouraged by some positive news from the mortgage market,” he added. 

Karen Noye, mortgage expert at Quilter, said the data showed that the market was “cautiously tiptoeing towards some semblance of stability”. 

She added: “Yet, the broader picture remains one of caution. The staggering 21% year-on-year fall in residential transactions, also released this week, muddies the picture and echoes the market’s hesitation. It’s a clear sign that many are still waiting for a more favourable wind in terms of house prices and mortgage costs. 

“The balance of recovery will hinge on how interest rates and the broader economic picture evolve in the coming months.” 

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “This looks like a welcome bump for the market, but it’s not quite as positive as it seems. A dearth of homes for sale has put a floor under prices, which rose slightly during November. But life remains tough for sellers. 

“Prices are on the up for the third successive month, which feels like good news. However, in order to get these higher prices, you have to actually sell your home – which is easier said than done. Sales have slowed to a crawl. October figures out this week from HMRC showed property sales were down a fifth in a year.” 

She added: “The slight easing in mortgage rates in recent months has meant a small pick-up in mortgage approvals for purchases on October, which could bring some relief in the coming months. But it’s not likely to be a turning point for the market, because approvals still remain well below pre-pandemic levels.”