Despite economic challenges, property prices have soared 19.9% above pre-pandemic levels, equating to a rise of £47,573
Demand for smaller homes significantly contributed to the growth of property prices across the UK, according to mortgage lender Halifax.
Nationally, annual property price growth jumped to 1.9% in February, recovering from a low of -4.1% in October 2023. Prices have risen by £5,318 over the last year, now just £7,801 short of the peak seen in August 2022.
Despite economic challenges, property prices have soared 19.9% above pre-pandemic levels, equating to a rise of £47,573. This contrasts with the 13.4% increase in the four years preceding March 2020.
The sharp increase in interest rates over the last two years initially caused many prospective buyers to reconsider their plans. Nevertheless, with interest rates stabilising, smaller homes have seen the most substantial price increases. This shift is partly due to buyers adjusting their expectations in response to higher borrowing costs and the wider cost-of-living pressures.
The resilience of the first-time buyer market has been crucial, Halifax noted, with FTBs constituting 53% of all home purchases with a mortgage in 2023 — the highest since 1995. Notably, flats and terraced houses, popular among FTBs, represented 57% of these purchases, though this varied widely by region.
The pandemic-era trend of seeking more space has reversed, with flats experiencing the highest price increases early this year. Prices for flats increased 2.7% annually in February, despite a decline to -5.9% last autumn. The average price for a flat is now just £5,551 short of its August 2022 peak.
Regionally, Scotland logged the highest price growth for flats, up 5.9% over the last year. Yorkshire and Humberside was the only region to see a drop in flat prices.
Nationally, flats remain 11.9% above their pre-pandemic prices, with the east Midlands showing the most significant gains.