Research by Halifax indicates a significant upturn in UK property prices driven by a rising demand for smaller homes.
Over the past year, property prices have increased by 1.9%, with flats experiencing a 2.7% rise and terraced houses a 2.6% increase, while detached and semi-detached homes have seen smaller gains.
Amanda Bryden, head of Halifax Mortgages, commented on the market dynamics: “It’s important not to gloss over the challenges facing the UK housing market, given the impact of higher interest rates on mortgage affordability, coupled with a continued lack of supply of new homes. But scratch beneath the surface and there is a more nuanced story, one which shows that demand for different property types in different parts of the country can vary hugely.”
This shift, particularly prominent among first-time buyers, comes as interest rates have stabilised, allowing new buyers to adjust to the economic realities of home ownership.
First-time buyers now make up the largest proportion of home purchasers with a mortgage since 1995, primarily targeting flats and terraced houses, which together accounted for 57% of all homes purchased by them last year. In London, this figure rises to 90%.
“Interest rates have stabilised and buyers adjust to the new economic reality of owning a home, one way to compensate for higher borrowing costs is to target smaller properties. This is especially true among first-time buyers, who have proven to be resilient over recent years,” Bryden added.
The price growth for flats at the start of this year marked a significant rebound, with annual growth reaching 2.7%, and the average price for flats standing at £163,016, only slightly below the peak price recorded in August 2022.
