A recent quarterly update from the highstreet building society Nationwide provides a regional overview of the housing market, and new data on annual house price growth. For property investors unsure of their next move, a recent rise in London's statistics and a report on homebuyer activity will help to clarify investment plans.
In February, the recorded annual house price growth was at 12.6%, but has since risen to 14.3% in just one month, which is the highest increase in such a short time since 2004. This makes the average UK house price £265,312, a record high due to prices rocketing by £33,000 since March last year. As such, house prices are now 21% higher than pre-pandemic, just as the number of mortgages approved for purchases is nearly 10% higher.
Due to lockdowns and working from home, buyer preferences have steered more toward detached properties, significantly impacting the housing market. Since Q1 2020, detached properties have increased in value by an average of £68,000, compared to just £24,000 for flats. As a result, homeowners are now struggling to trade up their properties, as the significant price gap between the types of homes available is at a record high, unless they can move to a less expensive region.
Whilst Wales retained its top-performing spot, with a 15.3% increase in house prices, London's performance month-on-month is more surprising. While the capital is still the weakest performing region across England, Scotland and Wales, it had a 7.4% price growth uptick for the region in Q1, compared to just 4.2% in Q4 2021.
This uptick equates to an annual average price increase of £41,351 or 8.4% since March 2020. The catalyst for this turnaround could be people returning to working in the office and the city's attractions. Either way, the demand for properties for both homebuyers and renters is starting to become evident. Many industry experts only expect that an increase in property supply will decrease the rise of UK house prices, especially in the capital, where the average property price stands at £534,977. Hopefully, these record-high prices could incentivise homeowners to sell to maximise their returns.
As the region begins to regain its former popularity, albeit slowly, industry experts don't expect to see a decline in house price growth for rural regions. With many people still working from home or hybrid working, the new priorities of more space and outer-city locations are still preferential to many homeowners. As such, the demand for these properties is unlikely to fall, but more likely just become stagnant.
External impacts on the market
The current cost-of-living crisis resulting from the staggering inflation rate is undoubtedly impacting the housing market. However, as mortgage interest rates remain below the rate of inflation and wage growth, there is the potential that, once the war in Ukraine subsides, interest rates could become negative and stay so for a while. This is a positive for property investors looking into the future, as it will be cost-effective to take out new loans on new purchases. It is worth noting that even if this is the case, the demand for properties will continue to outweigh the supply due to constant demand from homebuyers and renters, landlords looking to provide homes for renters, and people relocating from other countries or even Ukrainian refugees.
As demand remains high, it is essential to recognise how prospective buyers look for their next property finance deal. Interestingly, most UK homeowners (54%) would consider specialist lenders, regardless of whether they recognise them. Research shows that borrowers are more interested in the greater flexibility available to them by dealing with specialist lenders than the more straightforward approach necessary for dealing with mainstream banks.
The study also revealed that 32% of 690 mortgage customers used brokers to source their current deal, making it the most popular method. A further 24% remain with their current bank, or 21% choose to revert to a previous lender. The most common influences (according to 85% of customers) on a borrower's choice of mortgage are the terms of the loan and any additional fees that would need to be paid. Environmentally-conscious lenders are also in-demand by borrowers, with 58% holding their social policies and green credentials as highly important when deciding which product to choose.
The report concluded clear confidence in using a broker to source a mortgage, with 62% of customers agreeing that an intermediary can find a deal that would otherwise not be available to them, and 60% feeling that the application process is made easier. However, there is a distinct dissatisfaction with the customer care provided by lenders. 45% feel their mortgage provider offers poor communication, and 59% think more support should be provided regarding the mortgage and finance options available.