Home prices record their largest monthly rise in a year, Nationwide says

House prices rose at their strongest rate in a year in January, according to the latest figures from Nationwide.

Britain’s largest building society said that lower mortgage rates and increased buyers’ confidence that house prices will not fall in the near future are helping to revive the property market.

Nationwide recorded a 0.7 per cent rise in prices in January, with the average property now costing £257,656 compared to £257,443 the previous month.

House prices fell by 0.2 per cent annually in January 2024 – although this was an improvement on the 1.8 per cent fall recorded in December.

Unexpected rise: The Nationwide reported a 0.7% increase in home prices, beating expectations

Unexpected rise: The Nationwide reported a 0.7% increase in home prices, beating expectations

The property market’s resilience continues to surprise many analysts, and January numbers beat expectations, with a Reuters poll of economists forecasting monthly growth of 0.1 percent and Capital Economics forecasting monthly growth of 0.4 percent.

Robert Gardner, chief economist at the Building Society, said the price increase was mainly due to cuts in mortgage interest rates and more positive expectations of lower interest rates, but the outlook remained “highly uncertain”.

“Although a rapid recovery in activity or house prices in 2024 seems unlikely, the outlook looks a little more positive,” Gardner added.

“How mortgage rates evolve will be critical, as affordability pressures have been the main factor holding back housing market activity in 2023.”

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The housing market has been relatively lackluster in recent months, with Rightmove reported that it took 71 days for the seller to secure a buyer in December, up from an average of 55 days in July.

However, this slow pace has presented an opportunity for some buyers.

Jonathan Hooper, CEO of real estate firm Garrington Property Finders, said: “Prices are stabilizing in many areas, the number of homes coming onto the market is slowly increasing, and we are seeing potential buyers who held off on purchasing properties last year starting to purchase their properties.” Search seriously.

With the latest data from Nationwide adding to the feeling that prices have bottomed out, increasing numbers of buyers have decided to act now before prices start to rise again.

The average cost of a property is now £257,656, compared to £257,443 the previous month.

The average cost of a property is now £257,656, compared to £257,443 the previous month.

On an annual basis, prices fell by 0.2% in January 2023 according to Nationwide

On an annual basis, prices fell by 0.2% in January 2023 according to Nationwide

The mortgage eats up more of the take-home pay

Nationwide also said there has been a significant increase in mortgage payments as a percentage of the average take-home pay.

It said that at the end of 2023, a borrower on the average UK income who buys a typical first-time buyer property with a 20 per cent deposit will need to spend 38 per cent of their take-home pay on mortgage repayments.

This was well above the long-term average of 30 percent.

If average mortgage rates fell from their current level of about 5.5 percent to 4 percent, that percentage of take-home pay would drop to 34 percent, Nationwide said.

To bring average deposits back to 30 percent, mortgage interest rates would need to reach 3 percent.

“While the cost of mortgage needed to buy the average home remains high by historical standards, the rise in house prices at the start of the year shows that declines in mortgage rates have been sufficient,” said Andrew Wishart, chief economist at Capital Economics. For house prices to achieve further gains.

“Alongside improving overall sentiment around the YouGov house price outlook, we are pleased with our above-consensus forecast that they will rise by 3 per cent this year, reversing a 2.4 per cent decline in 2023.”

Nationwide highlights first-time buyer challenges

Nationwide also said that a typical 20 per cent deposit for a first-time buyer is now equivalent to 105 per cent of their average annual gross income.

This represents a decline from the all-time high of 116 percent recorded in 2022, but is still close to the pre-financial crisis level of 108 percent.

House prices are still very high compared to earnings

“This reflects that house prices are still very high relative to earnings, with the house price-to-earnings ratio standing at 5.2 at the end of 2023, well above the long-term average of 3.9,” Gardner added.

This has led to an increase in the number of first-time buyers needing help from family and friends, or from an inheritance, to raise a deposit.

In 2022/23, nearly half of first-time buyers had some help raising deposits, up from 27 per cent in the mid-1990s, Nationwide said.

The house price-to-earnings ratio was 5.2 at the end of 2023

The house price-to-earnings ratio was 5.2 at the end of 2023

Official figures show housing transactions fell in December

Home sales and purchases fell by 18 percent in the year to December 2023, According to the latest HMRC data.

Transactions completed ended the year at 1.02 million, which was 15 per cent below the 2017-19 average, according to property firm Savills.

Transactions on a monthly basis were down 1 percent compared to November 2023, falling to just over 80,000 transactions on a seasonally adjusted basis.

This was the fourth month in a row they recorded a decline. However, many real estate experts expect things to get better in 2024.

Nick Leeming, chairman of estate agent Jackson Stopes, said: “Despite today’s figures showing a weak final quarter of 2023, a seasonal slowdown is par for the course as celebration and reflection take priority in December.

“If last year was characterized by increased supply and initial buyer appetite, the cautious hope is that 2024 will see a period of greater stability and predictability.

“Supported by low inflation and competitive mortgage interest rates, the strong response from buyers to renew searches and move forward with completions will also encourage sellers to put their properties back on the market at realistic guide prices.”

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(Tags for translation) Daily Mail

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