House prices in the UK increased at their fastest annual pace in two years, rising by 4.9% in the 12 months to January, according to the latest figures from the Office for National Statistics (ONS).
The ONS reported yesterday that the average property price now stands at £269,000, marking the sharpest rate of growth since January 2023 and an acceleration from the 4.6% recorded in the year to November.
Regionally, house prices in England rose by 4.8% to an average of £291,000, while in Wales, prices increased by 6.0% to £210,000. In Scotland, the average price climbed by 4.6% to £187,000 over the same period.
The North East recorded the strongest annual house price inflation of any English region, with values rising by 9.1% in the year to January, up from 6.9% in December. London remained the weakest performer, with prices increasing by just 2.3%, albeit an improvement on the 0.4% rise in December.
CREATING A LEVEL PLAYING FIELD
Tom Bill, head of UK residential research at Knight Frank, says: “House price inflation has been falling since the start of the year as supply outweighs demand, which the index should reflect in coming months.
“Buyer appetite has been steady but we expect it to strengthen from next month as new rates of stamp duty create a level playing field for all buyers.
“That said, doubt remains over how quickly mortgage rates will fall, particularly if the spring statement isn’t well-received by financial markets and inflation stays stubbornly high. We also face months of uncertainty over how US trade tariffs may make life more difficult for UK borrowers. House prices should continue to rise faster in relatively more affordable parts of the country.”
And he adds: “The Renters Rights Bill creates uncertainty for landlords which may put upwards pressure on rents at a time when they are starting to come down from the highs of recent years. A piece of legislation intended to make life easier for tenants may inadvertently have the opposite effect if the supply of rental properties tightens.”
MOST COMPREHENSIVE
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “The inclusion of the approximately 40% of ‘cash’ sales with those financed by mortgages gives this most comprehensive of all the housing surveys its extra interest.
“The modest increase in house prices confirms what we have seen in our offices – a steady rise kept in check by improving stock levels.”
But he adds: “However, these figures reflect activity from a few months ago at least when many were trying to take advantage of the fast-disappearing stamp duty concession which skewed performance.
“Looking forward, some will inevitably fail to make the cut but February’s fall in the rate of inflation and wages still growing solidly will mean hard negotiations which are more likely to proceed than fail.”
“Perhaps not surprisingly rents – though still high – are not growing as fast as they have been while affordability becomes more of an issue.
“On the ground we are finding landlords are leaving the sector in response to tough tax and regulatory measures and worries about the forthcoming Renters’ Rights Bill although many are waiting to see the final version before making a decision.”
POSITIVE KNOCK-ON EFFECT
Jason Tebb, President of OnTheMarket, says: “Although historic, this data shows house prices continued to rise on an annual basis in January, with the average property price £13,000 higher than a year ago.
“Two interest rate cuts in the latter half of last year and one so far this year have had a positive knock-on effect on confidence, which the housing market relies so heavily on. With inflation falling unexpectedly to 2.8% in the 12 months to February, this may encourage the Bank of England, which keeps a close eye on inflationary pressures, to make another rate reduction sooner rather than later.
“Affordability remains a challenge but with a number of lenders reducing their mortgage pricing over the past few weeks, this may continue to ease if other lenders follow suit. As always, sellers coming to market hoping to take advantage of a spring bounce should take advice from their local agent and price accordingly.”
NEW HOMES BONUS
Nathan Emerson, Chief Executive of Propertymark, says: “Housing continues to play a vital role in the UK economy and an uplift in housing activity can help generate further economic growth.
“With the Planning and Infrastructure Bill heading through Parliament, this should pave the way for 1.5 million new homes across England and Wales before the next general election and should contribute positively towards stabilising supply and demand levels and help keep pace with predicted population growth across the forth coming years.
“Although the last Bank of England Money and Credit Report suggested that net mortgage approvals for house purchases decreased slightly at the start of this year, there is currently a strong appetite to borrow in order to purchase a potential new home.
“The same report suggested overall net borrowing rose by £0.9 billion. The news should deliver a sense of confidence to those considering taking ether their first or next step on the housing ladder.”
RENTERS’ RIGHTS BILL
And he adds: “With there being a decreased focus on the supply of new rental properties in the UK Government’s Renters’ Rights Bill, it sadly comes as little surprise that rents continue to increase.
“However, there are reasons to believe that they have not increased at the rate they have done in previous years. For example, recent data has found that annual rent inflation for new lets is running at its lowest level for 3.5 years.
“Propertymark recognises that the UK Government’s aim is to safeguard renters and give them greater security. However, an unintended consequence of continued legislation placed on landlords is a real concern echoed across the industry as overly prohibitive regulations will likely contribute to a reduced supply of rental homes, an increase in rent prices, and make it harder for people to find affordable housing.”
