Larger homes drive house price growth, especially in London

Bigger homes are driving house price growth in the UK, according to a report by Halifax. As mortgage rates ease, this trend may help first-time buyers enter the housing market. However, it could make it more difficult for them to upgrade to larger homes later. The average price of terraced houses increased by 4.5% in the year leading up to January 2025. Detached homes saw a rise of 4.1%, while semi-detached homes grew by 3.8%. In contrast, prices for flats rose only by 3.2%. Newly-built flats, however, experienced a significant increase of 6.7% in price. Halifax's head of mortgages, Amanda Bryden, noted that property types often shift in popularity based on market conditions. A year ago, flats were rising faster than detached homes. Now, more spacious properties are in demand as interest rates fall. Flats make up about 27% of first-time buyer purchases in the UK, with significant regional differences. In London, they represent 71% of these purchases, compared to just 4% in the East Midlands. A survey from property website Zoopla revealed that 78% of homeowners are unsure of their home's value. Those who have owned their property for 30 years tend to have a more accurate estimate due to better awareness of market changes. Mortgage rates vary significantly based on deposit sizes. Buyers with a larger deposit see lower rates, while those with smaller deposits face higher rates. This situation creates challenges for first-time buyers looking to afford a home. Terraced homes are popular because they often offer a balance of affordability and space. As property values change across different areas, buyers may adjust their preferences and search regions for better deals.