The rising values of larger homes are behind the overall increase in average prices as demand for flats lags, a lender found.
The Halifax House Price Index showed that UK house prices rose by 3.7% or £10,431 in the year to January, reaching an average value of £294,818. This passed the peak seen in August 2022.
This was driven by a 4.5% rise in the average value of terraced houses, reaching £235,296. Meanwhile, the average price of a detached home increased by 4.1% to £471,748.
Semi-detached homes rose by 3.8% to an average of £307,685, while price inflation for flats was slower at 3.2%, with an average price of £168,569.
Halifax said new-build flats were bucking this trend, as it found all new-build properties saw a 3.1% annual increase in value to an average of £314,587, while new-build flats rose by 6.7% to £237,427.
This beat the respective 3.6%, 2.4% and 2.2% annual rise in new-build terraced homes, detached homes and semi-detached homes.
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Amanda Bryden, head of Halifax Mortgages, said: “The fortunes of different property types tend to ebb and flow depending on broader market conditions. This time last year, the average price of a flat had risen more quickly than a detached house, as buyers adjusted to higher borrowing costs and sought to compensate by targeting smaller properties.
“Now, as interest rates have started to ease, it’s once again those homes offering more space [that] are fuelling demand. And that’s not just a short-term trend; over the last decade, bigger properties have tended to outperform smaller homes when it comes to price growth.”
She added: “This has caused the gap between the rungs on the housing ladder to widen further, presenting a bigger challenge to those looking to make the step up. However, that only tells part of the story.
“Slower growth among smaller homes is helpful for first-time buyers, and we saw a big rebound in that market last year, with a fifth more stepping onto the ladder.”
Price gaps in property types
Halifax’s data found that the gap between the cost of different property types had widened over the last 25 years.
In 2000, the average cost of a flat was £49,905, while a terraced house was just £9,105 more. An additional £22,006 would have got a buyer a semi-detached home in the year 2000, while an extra £51,655 would have covered the price of a detached property.
This year, the average price of a flat is £168,589, while an extra £66,726 would be needed for a terraced home. Buyers would need £72,839 more for a semi-detached home and an additional £164,063 for a detached property.
