Residential property prices rose at their strongest rate in a year in January, as falling mortgage rates and greater buyer confidence continue support the property market, latest data from Nationwide has revealed.

According to the building society, property price increased by an average of 0.7% in the month of January, with the average property now costing £257,656, up from £257,443 a month earlier.

The figures also show that property prices dopped 0.2% in January 2024 compared with the corresponding month last year, but this does mark a significant improvement on the 1.8% annual decline recorded in December.

Robert Gardner, the building society’s chief economist, said the house price increase was mainly down to recent cuts in mortgage rates, with fall falls anticipated this year, but he cautioned that the outlook for the housing market still ‘highly uncertain’.

“While a rapid rebound in activity or house prices in 2024 appears unlikely, the outlook is looking a little more positive,” GHardener said. “How mortgage rates evolve will be crucial, as affordability pressures were the key factor holding back housing market activity in 2023.”

Industry reactions: 

Iain McKenzie, CEO of The Guild of Property Professionals, commented: “UK house prices seem poised for a strong 2024, with January’s data signalling further market recovery.

“Despite the surprising uptick in inflation in December, buyers appear to believe there are bargains to be had, and are returning to the market faster than expected.

“Tomorrow’s Bank of England base rate announcement will be pivotal for those who have delayed their decision. Prospective buyers hope the temporary December blip won’t lead to a spike in interest rates, which has plateaued at 5.25% since September.

“But with inflation expected to continue falling, many are optimistic we’ve reached the peak of the rate-rise cycle – potentially prompting further cuts to the base rate.

“This is likely to motivate lenders to continue reducing mortgage rates, enhancing accessibility to homeownership, particularly for first-time buyers eager to enter the property market.”

Nicky Stevenson, managing director at Fine & Country, said: “The housing market has started the year strongly, and increasing buyer demand has pushed average prices up in the first month of the year.

“The housing market has been resilient during a turbulent period for the economy, and although the recent rise in inflation is a reminder that there could be more bumps ahead, there are many reasons to be positive.

“Mortgage approvals continue to rise month on month, as buyers return to the market at a steady rate. Many of them have been enticed to begin or resume their property search as a result of falling interest rates.

“Yet the Bank of England has a big decision on its hands tomorrow when it decides what will happen with the base rate.

“Another pause in rate hikes, or even a fall, will keep encouraging buyers to the market, but a move in the opposite direction could put a bit of a damper on activity in the early part of 2024.”

Verona Frankish, CEO of Yopa, commented: “The property market has started the year where it left off in 2023 – very much on the front foot. We’re seeing buyers return with confidence, spurred on by a reduction in mortgage rates, and there has also been an increase in for sale stock reaching the market as sellers look to ride this wave of improving market sentiment.

“While we expect that interest rates will remain at 5.25% this week, this will only help to steady the market further, providing buyers with the confidence that they can proceed with their purchase without the goal posts of mortgage affordability moving during the process.”

Jason Tebb, president of OnTheMarket, said: “The housing market has got off to a strong start this year with consistently falling mortgage rates encouraging buyers and sellers to take action.

“Despite the market feeling more buoyant with an increase in stock and enquiries, affordability concerns remain an issue following consecutive rate rises last year and the continued high cost of living. This is particularly the case in London and the South East, while nearly half of first-time buyers need to call upon family and friends to help pull together a deposit.

“Although mortgage rates are falling, they are higher than many have grown used to in the wake of the pandemic, so buyers remain sensitive on price. Sellers keen to take advantage of the surge in buyer interest must continue to be realistic with regard to their pricing expectations.”

Nathan Emerson, CEO of Propertymark, commented: “The reported month on month increase in house prices will start to encourage homeowners to feel more confident that they can potentially make their next move. 2024 seems to be starting off more positive for the housing market, and let’s hope that trend continues. If the Bank of England decide to bring down interest rates too, this should give sellers even more confidence and ease the pressure on affordability. Hopefully this is the start of a period of economic recovery for the nation.”

Sam Mitchell, CEO of Purplebricks, said: “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.”

Dominic Agace, chief executive of Winkworth, said: “2024 has started more briskly than expected. There is a consensus of opinion now aligning around a soft-landing scenario for the UK, with inflation predicted to be back on track by April, leading the way to a path of up to five interest rate cuts this year. There is a sense that perhaps the worst of the squeeze is behind us and we are seeing a gradual return to normality. This is borne out by our buyer registrations which are 26% year to date ahead of 2023 and 1% ahead of the three-year average.

“There is still a lot of refinancing to be done in the market, with those realising far higher rates than initially locked in at and we are seeing sellers coming to the market in equal numbers to potential buyers [23% head of last year and 12% ahead of the three-year average].

“While we don’t expect to see price declines this year, we do not expect to see significant price rises either, with these numbers instead feeding through into activity amongst buyers and sellers, which has been held back over the past 18 months.”

Tom Bill, head of UK residential research at Knight Frank, commented: “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.”

Matt Thompson, head of sales at Chestertons, said: “The gradual introduction of more attractive mortgage products boosted buyer confidence in January, resulting in more buyers entering the market. This increase in activity was further driven by pent-up demand from house hunters who were unable to find a property last year and are motivated to finalise their search. Sellers also feel more confident about attracting the right buyer for their home which led to a slight increase in the number of properties being put up for sale in January.”

Jonathan Hopper, CEO of Garrington Property Finders, added: “Prices are stabilising in many areas, the number of homes coming onto the market is slowly ticking up and we’re seeing would-be buyers who held back last year begin their property search in earnest. With the Nationwide’s latest data adding to the sense that prices have bottomed out, increasing numbers of buyers have decided to act now before prices start to pick up again.”