Investors' Guide to UK Housing Market Right Now

The latest UK house price index, over the weekend, lifts the lid on exactly what’s happening in the UK housing market - with investment opportunities greatest in one area where prices are still weakest.

In figures, average house price fell by 0.4 per cent in September, compared to 1.8 per cent in August; on an annual basis prices are down 4.7 per cent - slightly more than the 4.5 per cent in August. 

The typical UK home now costs £278,601, around the level seen in early 2022; and prices are still up 1.0 per cent since the first Bank of England Base Rate rise in December 2021 - and prices are still £39,000 above pre-pandemic levels.

For investors, it’s worth noting that the Halifax says the South of England continues to see most downward pressure on property prices.

Kim Kinnaird of Halifax says: “Activity levels continue to look subdued compared to recent years, with industry data showing lower levels of new instructions to sell homes and agreed sales. Borrowing costs are the primary factor, given the impact of higher interest rates on mortgage affordability. Against this backdrop, homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer’s market. 

“However, with Base Rate now likely to be at or around its peak, we are seeing fixed rate mortgages deals ease back from recent highs. Wage growth also remains strong, which has helped with affordability, with the house price to income ratio now at its lowest level since June 2020 (6.2 in September vs 6.3 in August). 

“Many economists and financial markets predict that Base Rate will remain higher for longer, with any significant cuts appearing unlikely until inflation gets closer to the Bank of England’s 2% target. Overall, these factors are likely to keep mortgage rates elevated in comparison to recent years, constraining buyer demand and putting downward pressure on house prices into next year.” 

The Bank of England’s decision to hold Base Rate at 5.25 per cent at the most recent monetary policy committee meeting ended a run of 14 consecutive increases. This was the fastest monetary policy tightening cycle in recent history. 

House prices have proven more resilient than expected over that period, despite higher mortgage rates suppressing market activity.