House prices rise – a blip not a bounce back

Sarah Coles, head of personal finance at Hargreaves Lansdown, comments on the publication of the Halifax House Price Index for November 2023, showing house prices rise – a blip not a bounce back.

Key points from publication:

• • House prices rose 0.5% in November – the second consecutive monthly increase.
  • They are down 1% in the year to September.
  • The average house now costs £283,615, around £40,000 above pre-pandemic levels.
  • Northern Ireland has shown the strongest annual growth – up 2.3% in a year, while the South East of England is struggling most, down 5.7% in a year.

Sarah Coles says:

“House prices rose in November, for the second consecutive month.

“And while sellers still face the tricky business of persuading someone to buy before they can realise these higher prices, we’ve had some more positive news on that front too.

“It has been a good month for a tough market, but we can’t get carried away just yet.

“House prices are robust, and the annual fall is now a modest 1%.

“In the next couple of months, as we compare to lower prices a year earlier, we could climb back into positive territory on an annual basis, especially if we see more monthly rises.

“Unfortunately, sellers face a problem that’s all too familiar now.

“On paper things are looking good, but they actually have to find a buyer first, and they’re still pretty thin on the ground.

“There has been some marginally better news on that front, with mortgage approvals recovering very slightly in October, back to 47,400, as mortgage rates have eased a little.

“The rate on a two-year fix is set to fall below through the psychologically important barrier of 6% in the coming days, which could persuade more buyers to take the plunge.

“However, it’s worth bearing in mind that as recently as June, we had 54,700 mortgage approvals in a month, so this isn’t a stellar recovery.

“This pick-up in mortgage approvals will take a few months to filter through into property figures. And even then, there’s every chance this is a blip rather than a bounce back.

“The Office for Budget Responsibility expects the economy to continue to stagnate, which could mean job losses and wage freezes.

“This would remove two of the most important things underpinning the market right now, so we are still expecting 2024 to be tricky for the property market.

“The OBR expects things to get worse before they get better, as a long tail of remortgaging means more forced sellers, and sticky inflation keeps mortgage rates elevated.

“As a result, it thinks house prices will fall 4.7% in 2024.

“It means some buyers who have been sitting on their hands may start to consider pressing pause for another year.

“If you’re in this position, it’s immensely frustrating.

“But if you are aged 18-39 and are buying a first property worth less than £450,000 it could open another door.

“You can take this opportunity to put £4,000 of your deposit into a lifetime ISA before April, and £4,000 after April, and as long as you’re not planning to buy until 12 months after you open the LISA, the government will top it up by 25%. So 2024 could at least be good for something.”

Kindly shared by Hargreaves Lansdown