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Annual growth in house prices turned positive for the first time in around a year in February, according to an index.
Across the UK, property values increased by 1.2 percent annually in February, following a 0.2 percent fall in January, Nationwide Building Society said.
It marked the first month since January 2023 that Nationwide recorded positive annual growth in house prices. In that month, there was a 1.1 percent year-on-year increase.
On a month-on-month basis, house prices increased by 0.7 percent in February, taking the average UK house price to £260,420.
Robert Gardner, Nationwide’s chief economist, said: “House prices are now around three percent below the all-time highs recorded in the summer of 2022, after taking account of seasonal effects.”
Mr Gardner noted that the decline in borrowing costs around the turn of the year appears to have “prompted an uptick” in the housing market.
He added: “Indeed, 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.”
The latest mortgage approval data from the Bank of England showed borrowing jumped by 7.2 percent month on month, reaching 55,227 in January, up from 51,506 in December.
HM Revenue and Customs (HMRC) figures showed this week that 82,000 home sales took place in January, which was 12 percent lower than January 2023 and two percent higher than December 2023.
It was the first month-on-month increase in house sales since August 2023 – however, it was still the lowest level of house sales recorded in January since 2013, HMRC said.
Mr Gardner continued: “Nevertheless, near-term prospects remain highly uncertain, in part due to ongoing uncertainty about the future path of interest rates. 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.”
He added: “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.”
Chris Barry, director at London-based conveyancer, Thomas Legal said: “The return to positive annual growth comes as no surprise. We had our biggest-ever day on an unassuming Tuesday in the middle of February. February overall was an extremely busy month for us.
“I don’t believe that the demand to buy property ever goes away, it just gets delayed and so many buyers delayed their search through the interest rate uncertainty of last year, then rates bottomed over the holiday period which is typically always quiet, and things really picked up again soon after.”
Mr Barry suggested that the gradual increase in mortgage rates may have forced people into taking the offers they had on the table and making decisions more quickly.
He added: “Which is no bad thing, considering not an awful lot happened in the market through summer into autumn last year. 2024 should be a year of growth and stability, right up until an election is announced, then activity will likely drop sharply as it usually does when the country goes to the polls.”
Nicky Stevenson, managing director at estate agent group Fine & Country, said: “We’re heading into one of the prime seasons for home sales, and sellers should look at this as a great time to get their home on the market.
“Properties tend to sell fastest at this time of year, and motivated buyers are still snapping up homes in desirable areas.”
Karen Noye, mortgage expert at Quilter, said: “There is some hope for the future as transaction levels and prices are gradually picking up, and should the Bank of England opt to cut interest rates later in the year as is expected then we could see things pick back up more rapidly.
“What’s more, the Government is rumoured to be considering the return of 99 percent mortgages at its Spring Budget next week which could give the market a further boost if more first time buyers can consider taking their first step onto the ladder.”
However, she noted: “If this does come to fruition, there would be risks associated with such a high loan-to-value mortgage so it is important that prospective homebuyers seek professional mortgage advice wherever possible.”
