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What’s happening with house prices right now?

While undoubtedly price sensitive, our prime indices suggest the top end of the housing market has proved to be more resilient than we expected might be the case six months ago.

On average, prices of prime homes in London moved very little in the first quarter of this year. Meanwhile in the prime regional housing markets prices fell by a relatively modest 1.0%.

This compares favourably to what we have seen across the wider UK housing market, with the Nationwide reporting a 0.8% fall in prices in the month of March, leaving values 4.6% below the highs in August of last year.

Further evidence of this resilience at the top end is given by data coming from Twenty CI, which shows that, when seasonally adjusted, the number of agreed sales of £1m+ homes in the market recovered to 95% of the levels seen in the first nine months of last year during March; even after making a deduction for fall throughs.

By contrast, data from the Bank of England shows recovery in mortgage approvals in the mainstream market to be far less pronounced. While they increased by a little under 10% in February, this still left them at 43,500 – someway below the average of 66,000 pre-pandemic.

What does this mean?

This points to a market which is weighted towards buyers with cash and equity, even though we have seen mortgage markets stabilise since the hiatus at the backend of last year.

Just before the Bank of England raised the bank base rate by a further 0.25% to 4.25% on 23rd March in the wake of a surprise increase in inflation, Moneyfacts reported that the cost of fixed rate mortgages had hit a six-month low.

They noted that the average cost of a five-year fixed rate mortgage at a 60% LTV had fallen to 4.76%. This is well above the same time last year, therefore continues to keep a lid on mortgaged buyers’ budgets. However, increased competition in the mortgage markets means the latest rate rise has been largely absorbed by lenders. And our friends at SPF are keen to remind us that the average headline figure is some way above what can be secured in most circumstances.

How does this compare to the lettings market?

In the three months to the end of March, rents across the prime markets of London rose by 1.4% – slightly more than the growth seen in the final quarter of last year. This reflects a market that remains that relatively tight on stock. Demand remains robust, yet there is evidence the market is becoming more price sensitive. 

Rental growth in London’s prime markets continues to be strongest for smaller, less expensive properties where needs-based demand is strongest. In comparison, the rarefied more discretionary market – commanding upwards of £3,000 per week – saw rents rise by just 0.2% in the same timeframe.

Rental values of prime properties in the commuter zone rose on average by 1.3% over the quarter, though somewhat less in the more suburban markets such as Northwood and Esher. Instead, markets of Turnbridge Wells, Henley and Cambridge led the way.

So, while it would be premature to report on green shoots of recovery in the housing market as we approach the spring, we can at least report that growing conditions have been better than expected.

We hope to expand on this in our next prime residential housing report, which will include the results of our most recent buyer and seller survey. I’d like to extend a big thank you to everyone who contributed.

If the anticipation for that release is too much for you, you may care to listen to my recent chat with Phil Spencer for Barclays Mortgage Insider, which you can find here.

Further information

What do the big numbers tell us about the UK housing market?
Price growth stabilises following the mini-budget dip