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Buyers are settling for less space

Demand for smaller homes has increased, indicating that the high cost of borrowing has prompted many homeowners to readjust their expectations.

Annual property price growth hit 1.9% in February1 – a significant improvement on -4.1% which was recorded last October. Smaller properties were a key driver of this uptick, with annual growth for flats and terraced houses reaching 2.7% and 2.6% respectively in February.

Many of the homeowners settling for smaller homes are first-time buyers, 57% of whom purchased flats or terraced houses last year. The strain has been particularly felt in London where property prices are highest, as 90% of FTBs in the capital bought a smaller home in 2023.

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1 Halifax

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