In the year to February, the average price of a flat rose by 2.7%, while the average terraced property value rose by 2.6%, according to Halifax
Prices for smaller homes like flats have been rising at a faster rate than larger properties amid affordability constraints, according to a major bank.
Halifax said there has been a switch in demand, reversing the “race for space” that was seen during the coronavirus pandemic as buyers searched for larger homes.
In the year to February, the average price of a flat rose by 2.7%, while the average terraced property value rose by 2.6%, according to Halifax.
Prices for semi-detached and detached homes rose at lower rates, increasing by 1.7% and 2.0% respectively.
Across Britain, Scotland saw the strongest growth in prices for flats over the last year, with a 5.9% increase, per Halifax.
Yorkshire and the Humber was the only English region to record a drop in prices for flats over the last year, with a drop of 2.9%. The region also logged the biggest rise in detached house prices over the last year, at 5.0%.
The north east of England, meanwhile, has seen the biggest percentage increase in the typical price of a terraced home, at 7.6%, as well as the biggest rise in the average price of a semi-detached home, at 5.9%.
In cash terms, detached homes rose by the most in price, by £8,853 on average in the year to February. The average price for a flat increased by £4,290.
The squeeze on mortgage affordability in the higher interest rate environment has given many potential homebuyers pause for thought before making a move, per Halifax.
But it added that, as rates have stabilised and activity has started to pick up, it is smaller homes that have logged the strongest increases in price growth in the early part of this year.
Homebuyers have been adjusting their expectations to compensate for higher borrowing costs, as well as coping with the general cost-of-living squeeze, it said.
Halifax added that a “resilient” FTB market has also helped.
While the overall number of FTBs is lower than recent years, the sector made up 53% of all homes bought with a mortgage in 2023 – the highest proportion since 1995 – per Halifax.
Flats and terraced houses made up 57% of homes purchased by FTBs last year, the bank said.
Amanda Bryden, head of Halifax Mortgages, said: 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.
This is particularly true among FTBs, who have proven to be resilient over recent years, and now account for the biggest proportion of homes purchased with a mortgage in nearly 30 years, she said.
She said: We see this reflected in property prices for the first few months of this year, with the value of flats increasing most sharply, closing the ‘growth gap’ on bigger properties that’s existed for most of the last four years.
The post Prices of flats rising at faster rate than larger properties first appeared on Invest for Property London, Buy Residential property UK.
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