UK House Prices Rise 0.7% in January

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Nationwide Shows Monthly Price Growth in UK Property Sector

Following news that the UK housing market performed better than expected in 2023, this year has gotten off to a positive start.

According to the latest Nationwide UK House Price Index, property prices have risen by 0.7% month-on-month. This gives a new national average property valuation of £257,656.

The annual growth rate has improved from -1.8% in December to -0.2% in January, the most significant increase since January 2023.

Let’s look at the Nationwide HPI in more detail and see what it means for UK buy-to-let investors.

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Affordability Comes Back to the UK Property Market

According to Robert Gardner, Nationwide’s Chief Economist, a rapid rebound in activity or house prices in 2024 seems unlikely, but a slightly more optimistic outlook exists. The latest RICS survey indicates a halt in the decline of new buyer enquiries, and there are tentative signs of an increase in the number of properties entering the market.

Mortgage rates have decreased recently, making potential buyers more optimistic. Investors have shifted their view on the future path of the Bank Rate, anticipating a decrease by the Bank of England over the next year following a significant decline in inflation over the last six months.

These shifts resulted in a decline in longer-term interest rates, influencing mortgage pricing around the turn of the year.

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What Is the Housing Market Like Across the UK?

Gardner says that affordability varies significantly across the country, with London, the south of England, and East Anglia experiencing notable pressures. In contrast, Scotland and the North are the most affordable regions, with mortgage payments as a percentage of take-home pay closer to their long-run average.

These variations create stark differences between those aspiring to buy and those able to do so, particularly pronounced in London. The average income of first-time buyers (for a single borrower) in the capital is approximately 55% higher than that of an adult full-time worker.

Similarly, in the South East and East of England, first-time buyers’ average income is about 25% higher than the average income in those regions.

Conversely, in regions where affordability is less strained, like Yorkshire & The Humber and the North East, incomes of actual first-time buyers align closely with average regional incomes. Furthermore, in Northern Ireland and Scotland, the average income of first-time buyers is slightly lower than the average income in those regions.

However, the Nationwide House Price Index fails to mention the North West, which has been touted as one of the top buy-to-let sectors in the country, with Savills predicting 9.2% returns for the regional market over the next 12 months. For that reason, buy-to-let investors may want to consider a buy-to-let property in Liverpool or Manchester, popular among prospective tenants and offering good-value properties with high potential rental yields.

Read More: For more information about regional property investment, check out some of our buy-to-let area guides, including:

How Did Industry Experts React to the Latest House Prices?

Head of UK residential research at Knight Frank, Tom Bill, said: “UK house price declines are bottoming out as the economic news improves. Inflation has fallen faster than predicted, which means financial markets believe rates will drop by a full percentage point in 2024.

“Whatever the Bank of England decides to do, mortgage lenders set their rates based on these lower expectations, which is increasing demand. Mortgage approvals are creeping up, and we expect UK house prices to rise by 3% this year. A general election later rather than sooner would allow more momentum to build.”

Meanwhile, CEO of Purplebricks, Sam Mitchell, highlighted the renewed optimism among buyers and sellers: “Confidence is returning to the housing market, and we have seen the number of buyers, viewings and offers all increase dramatically through January as banks continue to actively compete on rates. With the general election likely to take place later in the year than originally anticipated, there is enough certainty to prolong this strong start to 2024.

“With the number of homes coming to the market up just 2% year on year, competition for properties is building. It’s more of a sellers’ market now than we’ve seen since the Truss budget in 2022. Assuming inflation continues to slow, we expect this upward trajectory in the market to continue until we enter the political uncertainty that inevitably comes with an election.”

Discover More: If you want to learn more about buy-to-let investment, take a look at our guides on how to buy a house through your business in the UK and how to make money from property.