UK housing costs reached a record high of £298,083 in November, an increase of almost £5,000 on the previous record of £293,507 in October, according to Halifax. This new high surpasses the previous record set in June 2022.
Head of mortgages at Halifax, Amanda Bryden, attributed the rise in prices to increased demand for mortgages, boosted by the easing of borrowing costs. “The latest figures continue to show an improvement in mortgage demand as lower mortgage interest rates boost buyer confidence,” she noted.
However, Bryden tempered the optimism, warning that affordability issues remain a significant barrier for many potential buyers. “Buyer confidence could be tested in a changing economic environment,” she commented. “This should support house price growth, albeit at a modest pace, given that borrowing costs remain above the average of a few years ago.”
Supply Constraints Driving Price Growth
Amy Reynolds, Head of Sales at Antony Roberts estate agency, highlighted the impact of limited housing supply in certain areas. “Those areas where there is limited stock to tempt buyers are seeing prices hold firm and indeed rising in some cases,” she explained.
Reynolds emphasized that homes priced correctly and presented well continue to attract buyers swiftly. “Buyers may pause to assess the financial implications of a purchase, but high-demand areas are likely to retain interest into the new year and beyond,” she added.
Tax Pressures Signal Housing Market Slowdown
Alice Haine, a Personal Finance Analyst at Bestinvest, suggested that the housing market may experience a slowdown after April 1, as tax considerations weigh on buyers. “Beyond the start of April, the market is likely to be more muted as buyers choose to purchase cheaper homes to reduce their tax bill or negotiate more aggressively to afford their desired property,” she observed.
Haine also pointed out the additional financial strain faced by second homeowners and buy-to-let landlords. “There is also the sting in the tail for second homeowners and buy-to-let landlords, who are already contending with the hike in property tax on second property purchases, which came into effect immediately,” she said.
2024 Housing Market: Affordability vs. Economic Challenges
The government’s pledge to boost living standards and deliver 1.5 million new homes remains a cornerstone of its housing policy. While these measures aim to enhance affordability, Haine noted that broader economic challenges, including the cost-of-living crisis and higher tax burdens, continue to erode disposable incomes.
“The combined effects of the cost-of-living crisis and the higher tax burden of recent years have already dealt a heavy blow to how much money people have left in their pockets after they have paid tax and accounted for inflation,” Haine concluded.
As the housing market navigates these competing forces, the outlook for 2024 will likely hinge on the interplay between economic stability, housing supply, and borrowing costs.
