House prices grew by 0.7% in February, taking annual growth to 1.2%, according to Nationwide. This is the first time annual growth has been positive since January 2023, as an increase in demand at the start of the year has led to greater market activity. 

But contradictory economic indicators make the near-term outlook uncertain. The Bank of England (BoE) continues to balance tackling inflation with low economic growth. The UK fell into a technical recession at the end of 2023 while wage growth continued to outstrip inflation, according to the ONS. These conflicting narratives have pushed back expectations for the first base rate cut, which Oxford Economics now predicts to come in June followed by two further cuts expected later in 2024. 

Mortgage lenders have shown greater caution in light of the economic uncertainty and an increase in swap rates. Many have increased their rates following substantial reductions at the start of the year when they anticipated earlier base rate cuts. Further delays to these cuts will keep rates higher for longer, tempering the growth in demand and reducing upward pressure on prices.

Buyers have taken advantage of previous falls in mortgage rates, increasing market activity. Mortgage approvals in January ticked up to 55,200, according to the Bank of England, the highest number in 15 months. This supported an increase to sales agreed which were 27% higher in February compared to the same month last year and even 13% above the 2017-19 average, according to TwentyCI. 

Early activity indicators are yet to translate into completed transaction numbers, with 68,090 in January, according to HMRC. This was -15% below the 2017-19 average, but will likely grow in the coming months due to the higher number of sales agreed in the first two months of 2024. 

More areas saw house price falls in the lagged Land Registry data, but regional differences remained. At least half of local authorities in every region experienced annual price falls for completed sales in the year to November 2023. In the North and Midlands, 65% of local authorities saw prices decrease, as affordability pressures impacted even these more affordable markets. Affordability constraints were nevertheless still more pronounced in the South, where 92% of local authorities saw annual falls.

Annual rental growth across the UK in January was 7.8% according to Zoopla, down from 8.2% in the year to December. Scotland is now the only region with annual growth of over 10%, as rent control policies have led to a reduction in supply and put upward pressure on newly agreed rents. Other northern regions had above average growth, including the North East (9.9%) and the North West (9.8%).