UK Residential Real Estate Prices

UK Residential Real Estate Prices

UK residential real estate prices are on the upward move again, already pricing out many first-time buyers in the large capitals, particularly London. 

In September, average UK house prices rose to their fastest rate for two years as falling mortgage rates boosted buyer demand.

The latest Nationwide House Price Index shows the average UK house price rose by 3.2% annually in September and by 0.7%, every month.

The average UK residential real estate price is £266,094, which is its fastest pace of growth since November 2022, when average values rose 4.4%

The average price remains around 2% below the all-time highs, recorded in summer 2022. 

UK residential real estate prices have been boosted by August’s interest rate cut, mortgage rates dropping, and inflation staying near the Bank of England’s 2% target

If you can believe the official statistics, the annual growth for regular earnings (excluding bonuses) was 5.4%, from April to June 2024.

So perhaps higher wages gave those wanting to purchase a home more confidence.  

“Income growth has continued to outstrip house price growth in recent months while borrowing costs have edged lower amid expectations that the Bank of England will continue to lower interest rates in the coming quarters,” says Robert Gardner, chief economist at Nationwide.

“These trends have helped to improve affordability for prospective buyers and underpinned a modest increase in activity and house prices, though both remain subdued by historic standards.”

UK residential real estate prices rose in most regions during September

Northern Ireland recorded the highest level of growth, with average prices up 8.6% compared with the third quarter of 2023.

Average prices in Scotland rose 4.3% annually, while Wales saw a more modest 2.5% year-on-year rise.

Across England overall, typical prices were up 1.9%. The North West was the best-performing English region, with prices up 5.0% year-on-year, according to Nationwide figures.

What is the future for UK residential real estate prices? 

The consensus amongst real estate agents, for home prices was dire for the first half of 2024 

High interest rates and sticky inflation were the main reasons for their dire predictions.

But in Q2, the UK economy emerged out of recession, and inflation has slowed to the Bank of England’s 2% target.

Moreover, interest rates were cut from 5.25%to 5% in August, with more expected in the coming months.

Mortgage lenders have already begun cutting pricing in response.

The fall in mortgage rates has been a significant driver in prices increasing. With the Bank of England holding its base rate at 5% in its last review, and lenders offering five-year fixed rates at the 4% mark, means the environment has become more favourable for buyers. Many lenders have also increased their lending limits, with some now offering loans of up to six times household income.

Demand was also boosted by buyers putting off decisions until after the election, according to Tom Bill, head of UK residential research at Knight Frank.