Prices of flats are increasing faster than other types of property, says Halifax

Halifax reports that prices for smaller homes like flats have been outpacing those of larger properties due to affordability issues, signalling a shift in demand and reversing the “race for space” trend from the pandemic era when buyers were on the hunt for more spacious abodes.

During the year leading up to February, flat prices saw an average increase of 2.7%, while terraced houses edged up by 2.6%, according to Halifax. Meanwhile, semi-detached and detached homes experienced more modest growth, with increases of 1.7% and 2.0% respectively.

Scotland led the charge in Britain with the strongest price growth for flats, witnessing a 5.9% surge over the past year, as reported by Halifax. In contrast, Yorkshire and the Humber was the sole English region to see a dip in flat prices, which fell by 2.9%. However, the same region topped the charts with the largest rise in detached house prices, climbing by 5.0%.

The north east of England boasted the most significant percentage increase in terraced house prices at 7.6%, and also led with the highest jump in average price for semi-detached homes at 5.9%. When it comes to cash terms, detached homes had the heftiest price hike, averaging an £8,853 increase over the year to February, while the average price for a flat went up by £4,290.

The skyrocketing mortgage rates amid the higher interest period has prompted many prospective homeowners to think twice before taking a leap, as per Halifax. However, they pointed out that since rates have found a balance and activity has regained momentum, smaller homes evidenced the most significant price growth in the early months of this year.

Navigating through inflated borrowing costs and the overall cost-of-living squeeze, homebuyers are restructuring their expectations, suggested the banking giant. Aiding the scenario, the “resilient” first-time buyer segment has also pitched in.

Although the total count of first-time buyers declined compared with recent years, it represented 53% of all house purchases made with a mortgage in 2023 the largest share since 1995, stated Halifax. First-time buyers bought up flats and terraced houses which formed 57% of homes purchased last year.

Amanda Bryden, head of Halifax Mortgages, commented: “As 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.”

She added, “This is especially true among first-time buyers, who have proven to be resilient over recent years, and now account for the largest proportion of homes purchased with a mortgage in almost 30 years. We see this reflected in property prices for the first few months of this year, with the value of flats rising most sharply, closing the ‘growth gap’ on bigger properties that’s existed for most of the last four years.”

The figures were unveiled as property portal Zoopla predicted an uptick in housing transactions, forecasting around 100,000 more property sales this year compared to 2023, with projections of approximately 1.1 million sales in 2024 versus one million in the previous year. Zoopla highlighted that property markets in southern England and the East Midlands are particularly prone to ongoing price declines.

Richard Donnell, executive director at Zoopla, commented: “The pipeline of sales is growing and we expect 100,000 more people to move home in 2024 than last year.”

Here’s a breakdown of the average increases in UK property prices by type for the year leading up to February, courtesy of Halifax. The figures reveal the average prices in February 2024 alongside the annual growth in both percentage and cash terms:.

Flat, £163,016, 2.7%, £4,290.

Terraced, £224,173, 2.6%, £5,643.

Semi-detached, £295,199, 1.7%, £4,797.

Detached, £451,655, 2.0%, £8,853.