Demand for flats has driven UK property prices so far this year, as more first-time buyers settle for smaller homes.
Prices for flats grew 2.7pc over the year to February, up £4,290 according to high street lender Halifax – after sinking by as much as 5.9pc last autumn.
The amount buyers are splashing on flats is now £163,016, just £5,551 below the peak price recorded for flats in August 2022.
Alice Haine, a personal finance analyst at Bestinvest, said the new figures could signal an end to the race for space as high living costs and interest rates take their toll.
She added: “No surprise then that buying aspirations have been downsized, with first-time buyers now favouring flats and smaller terraced homes.”
While there are fewer first-time buyers in the market than in recent years, they made up more than half (53pc) of all homes purchased with a mortgage last year – the highest proportion since 1995.
Despite difficult financial times, Ms Haine said, first-time buyers are still determined to get a foot in the property ladder.
Since the start of the pandemic four years ago, the average price for flats has increased almost 12pc – compared with 21pc house price growth for terrace houses over the same period.
Although in the East Midlands, flat prices have grown by a considerable 18.7pc – or £20,923 – since the pandemic began, the biggest increase of any region over that period.
Meanwhile, demand for larger properties has eased. House price growth for semi-detached houses over the past year has underperformed terraces, flats and detached homes – at just 1.7pc.
Tom Bill, of estate agency Knight Frank, said: “Not only do higher mortgage rates mean tighter budgets, demand for housing also becomes skewed towards needs-driven buyers.
“As a result, first-time buyers, growing families and people moving for work have driven demand in lower price brackets over the past year.”
Despite demand for flats, detached homes still maintain the biggest increase in average house prices of any property type over the past four years – up by 23.9pc, or £87,034.
But Amanda Bryden, mortgages head at Halifax, said flats were catching up.
“[First-time buyers] 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 past four years.”
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