House prices grew by 0.7% in January, taking annual growth to -0.2%, according to Nationwide. The stronger than expected monthly figure means house prices have essentially been flat over the last year. This is despite average monthly borrowing costs remaining much higher than at the beginning of 2022.

House prices have been supported by rising levels of demand. A majority of surveyors reported both increasing supply and demand for the first time since March 2021, according to the January RICS survey. With both supply and demand increasing, there is little pressure on prices to either fall or rise.

Rising levels of demand come alongside improved consumer confidence. This rose to a two-year high in January, according to GfK, as the fears of a significant recession waned and inflation continued to trend downwards.

Higher demand has driven up the number of sales agreed, which were 23% higher in January compared to the same time last year, according to TwentyCI. This early indicator of activity was also 8% above the 2017-19 average for the month.

This rise in the demand indicators has yet to translate to more concrete measures of activity. Completed transactions in December 2023 were -16% down on the 2017-19 average, according to HMRC. Although mortgage approvals in December ticked up, these were also down -22% compared to their pre-pandemic average, according to the Bank of England. These measures are likely to follow the upward trend of the demand indicators as 2024 data emerges.

Falling mortgage interest rates have supported increasing levels of demand, but lenders are now typically holding back on further rate cuts until the path of interest rates becomes clearer. While the base rate is likely to drop later this year, the exact timing remains uncertain, and a plateau in mortgage rates is likely for the time being.

Regional differences in house price growth are now clear in the more lagged Land Registry data. 85% of local authorities in the south experienced annual falls in the year to October 2023, compared to just 48% in the North and Midlands. Affordability at higher mortgage rates is a greater constraint in the typically higher value south. Rossendale had the greatest growth at 5.9%, while Hastings had the biggest fall of -8.4%.

Annual rental growth across the UK in 2023 was 8.3% according to Zoopla, down from 8.8% in the year to November. On a three-month basis all regions have seen growth decelerate. While the rate of growth is falling, it still remains historically high, with monthly growth of 0.4% in the UK compared to the 2017-19 average of 0.1%.