Housing market rebounds in February as prices rise by 1.2%

The UK’s housing market showed further signs of recovery in February, as house prices increased by 1.2% year-on-year, according to Nationwide.

This was the first positive annual change since January 2023, when prices fell by 0.2%.

On a monthly basis, prices rose by 0.7% last month, after adjusting for seasonal factors.

House price rise is down to lower borrowing costs

Nationwide’s chief economist Robert Gardner says the house price rise is down to lower borrowing costs, which stimulated demand for mortgages and properties.

He said: “Industry data sources point to a noticeable increase in mortgage applications at the start of the year, while surveyors also reported a rise in new buyer enquiries.”

However, he cautioned that the outlook for the housing market remains uncertain, as interest rates could rise soon.

He added: “After falling sharply in late December, swap rates, which underpin fixed rate mortgage pricing, have drifted back up.

“Borrowing costs remain well below the highs recorded last summer but, if the recent upward trend is sustained, it threatens to restrain the pace of any housing market recovery.”

Household incomes are still recovering

He also noted that household incomes are still recovering from the impact of the pandemic, and consumer confidence is fragile.

Mr Gardner explains: “While the squeeze on household budgets is easing, with wage growth now outstripping inflation by a healthy margin, it will take time to make up for the ground lost over the past few years, especially given consumer confidence remains fragile.”

Nationwide data shows that house prices are still around 3% below the record levels reached in the summer of 2022, after adjusting for seasonal factors.

‘Over-concentration on property prices’

Jeremy Leaf, a north London estate agent and a former RICS residential chairman, said: “There tends to be an over-concentration on property prices when it comes to assessing how the housing market is performing.

“Prices impact buyer and seller confidence but transactions and affordability, which is most stretched in higher-value areas such as London, are arguably more relevant.

“In our offices, more valuations, listings and viewings combined with fewer fall-throughs than this time last year are feeding through to agreed sales, mortgage approvals and exchanges.”

He adds: “However, while Nationwide reports another rise in prices, the market does remain price sensitive.

“Only competitively-priced properties are attracting attention. Sellers must price realistically or offers won’t be forthcoming and market improvement may not be sustained.”

‘Winter chill hasn’t kept home buyers at bay’

Sara Palmer, the distribution director at TML, said: “The winter chill hasn’t kept home buyers at bay with the latest Nationwide HPI figures for February revealing an uptick in house prices, pointing to an increase in demand.

“No doubt this has been helped by recent reports that members of the Bank of England’s Monetary Policy Committee have begun to vote for a decrease in interest rates, sparking optimism that rate cuts will be seen in the near future.”

She added: “All eyes will also be on next month’s Budget, with many hoping that strides will be made to help solve the current affordability challenges within the market.

“It’s vital that any new initiative introduced aims to solve the challenge for the long term; incentivising more supply into the market to meet demand.”

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