In examining yet another report on the UK housing market the question of affordability is at the forefront. Halifax, the largest UK lender, released their most recent data report revealing another record high in the average house price. The month to month increase amounted to 1.3% as the average house price rose in November to £298,083. The annual growth was 4.8%, which is the strongest increase since November 2022. As this is the average UK house price, there are indeed cheaper averages by regions such as in Scotland or Northern Ireland where the average is lower while the average in London is higher.

Northern Ireland recorded the largest increase of annual growth for November of any region in the UK at 6.8% to a new average of £203,131. Whereas, Scotland had a annual rise of 2.8% to £208,957. In London, where house prices are usually more costly, the annual growth of 3.5% took the area’s average house price to the most expensive spot at £545,439.

The demand in the housing market could be due to the lower interest rates available. It could also be due to the rush to buy from the current supply of listed properties on the market before the stamp duty discount reverts back to its original zero tax price on the first of April.  

Interest rates are certainly attractive and are helping draw attention to the market with some mortgages near or lower than the current Bank of England standard base rate of 4.75%. Yet, with elevated house prices it would reason many buyers are being priced out of the market, especially first-time home buyers. 

Concerning the latest data report, Amanda Bryden, Head of Mortgages with Halifax, remarked, “UK house prices rose for the fifth month in a row in November, up by +1.3% in the month, the biggest increase so far this year. This pushed the annual growth rate up to +4.8%, its strongest level since November 2022. As a result, the record average house price we saw in October edged higher still, with a typical property now costing £298,083.

“Latest figures continue to show improving levels of demand for mortgages, as an easing in mortgage rates boost buyer confidence. However, despite these positive trends, many potential buyers and movers still face significant affordability challenges and buyer confidence may be tested against a changeable economic backdrop.

“As we move towards the end of the year and into 2025, positive employment figures and anticipated decreases in interest rates are expected to continue supporting demand. This should underpin further house price growth, albeit at a modest pace as borrowing costs remain above the average of a few years ago.”

For home buyers in 2025, not only are house prices to remain in steady growth, but the stamp duty will be returned to normal without a discount after the first quarter. Interest rates may be reduced lower than they are now, offering cheaper buying, but with strong demand house prices will rise and it appears the expectation of climbing onto the property ladder is pay what you must to be a homeowner since higher asking prices are not turning off buyers.

Fewer first-time buyers are being deterred from home ownership simply due to the fact that it might be cheaper than renting. While house prices have been rising, so have rental costs. Rather than absorb the never ending rise to renting, first-time buyers are becoming creative to afford purchasing a home. 

Some are buying cheaper homes in need of improvements and upgrades that can be completed over time. Some are buying multi-family homes sharing the expense with friends or family. Others are buying homes with the intention of creating a flow of income from an attached flat or private entry room to help with the affordability.

There is an expectation the demand from buyers will be strong and grow until the stamp duty change. The level at which the discount is offered is for homes more often purchased by first-time buyers and this could bring more of them to the market. However, after the stamp duty change, the normal seasonal spring boost will be around the corner and could bring further growth to the market.

The forecast for a strong housing market is good news for homeowners as they could be set to gain substantial equity in their properties as house prices grow. This in turn could assist them with their loan to value (LTV) ratio when it comes time to remortgage and gain them access to the best interest rates.

The UK housing market growth for November may have been surprisingly stronger than expected, but it thankfully indicates hope for a strong economy in the coming year.