House prices are back on an upward march, sending the cost of the average home in London to over £667,000, a new survey shows. Rightmove said house prices in the capital jumped 0.2 per cent over the last month and 6.1 per cent annually.
On a nationwide basis, prices climbed 0.9 per cent over the last month to £362,000, reversing declines of 1.1 per cent and 2.1 per cent in November and December respectively. They are up 6.3 per cent over the last year.
The upward jolt has defied analysts’ gloomy forecasts predicting that skyrocketing mortgage rates would put the UK’s property market in a vice in 2023. Sales are expected to fall sharply due to prospective buyers being priced out of the market by lenders passing on the Bank of England’s nine successive interest rate hikes. A cost of living crisis eroding purchasing power is also anticipated to chill sales and kick prices lower. However, Rightmove’s data signalled no let up for desperate home buyers, with demand holding up pretty well.
The number of people contacting estate agents about a possible home purchase has climbed 55 per cent in the first couple weeks of 2023, the biggest new year bounce since 2016. Over the course of 2021, property prices raced ahead, driven by a stamp duty holiday, people relocating to the countryside to capitalise on greater uptake of remote working and rock bottom interest rates. However, those factors started to reverse last year, causing prices to dip. Liz Truss’s disastrous mini budget which rocked financial markets and sent borrowing costs flying also sucked demand out of the market. London’s property market suffered from flatlining price growth due to the exodus of Brits to the countryside during the pandemic.
Despite January’s price jump, experts said affordability constraints caused by banks doubling mortgage rates could choke the housing market. “We expect that the full effect of affordability constraints and last year’s mortgage rate rises will hold back some segments of the market in the first half of the year,” Tim Bannister, director of property science at Rightmove, said. According to data site Moneyfacts, the rate charged on an average two-year fixed mortgage has doubled over the last year to 5.79 per cent this month from 2.52 per cent in January 2022.
There is mounting concern over whether homeowners will dump properties as a result of being unable to afford higher rates if they remortgage. The Office for National Statistics earlier this month warned nearly 800,000 mortgagors are set to be crushed by their bills doubling and the Financial Conduct Authority has sounded a similar alarm.
