Annual house price growth slows amid record jumps in rental prices

Property values increased by 0.6% annually in July 2023, compared with a 13.8% annual rise in July 2022.

The average UK house price in July 2023 was £290,000 (Anthony Devlin/PA) (PA Archive)

Annual house price growth in July 2022 was 23 times the rate of growth seen in the same month this year, according to official figures.

Average UK house prices increased by 0.6% annually in July 2023, slowing from 1.9% in June 2023, according to the Office for National Statistics (ONS).

Back in July 2022, annual house price inflation was running at 13.8% – 23 times the 0.6% rate of growth in July 2023.

The average UK house price in July 2023 was £290,000.

While this was £2,000 higher than 12 months earlier, it was also £2,000 below a recent peak seen in November 2022.

On a seasonally adjusted basis, the average UK house price decreased by 0.5% in July 2023, following a month-on-month increase of 0.7% in June 2023.

Average house prices increased over the 12 months to July 2023 to £309,000 in England (a 0.6% annual increase) and £192,000 in Scotland (0.1%), while average house prices in Wales decreased to £216,000 (down by 0.1%).

In Northern Ireland, property values increased by 2.7% annually to £174,000 in the second quarter of 2023.

Within England, the North East recorded the highest annual percentage house price increase in July at 2.7%, while the South West recorded the weakest growth, with house prices falling by 1.0%.

London’s average house prices remain the most expensive of any region in the UK, with an average price of £534,000. Average house prices in London fell by 0.8% annually in July.

The figures were released as separate ONS figures released on Wednesday showed that Consumer Prices Index (CPI) inflation was 6.7% in August, down from 6.8% in July.

The surprise easing of CPI will be closely watched by the Bank of England’s policymakers, who are meeting this week to decide whether to push through another interest rate hike.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Swap rates, which underpin the pricing of fixed-rate mortgages, have continued their decline in recent weeks after a period of extreme volatility.

“This is giving lenders the confidence to cut their mortgage rates, with a number making significant reductions and more expected to follow.

“The markets reacted favourably to the latest inflation data this morning.”

Andrew Montlake, managing director of Coreco Mortgage brokers, said: “I would expect to see swap rates continue to ease over the coming days which will give lenders more ammunition to escalate the rate war which has been brewing for the last few weeks.”

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: “Some potential buyers might be emboldened by the recovery in their real incomes in the second half of the year, as wages rise more quickly than prices.

“But consumers’ confidence is still very weak by past standards and expectations of further house price falls remain entrenched. On balance, then, we expect a peak-to-trough fall of around 6%, with the nadir coming at the end of the year.”

Jonathan Hopper, chief executive of Garrington Property Finders, said: “Even the most optimistic sellers are having to accept that this is unequivocally a buyer’s market.”

Jean Jameson, chief sales officer at estate agent Foxtons, said: “Properties with more competitive pricing are still stimulating buyer demand and, for Foxtons, deals agreed in July were the highest they have been over the past five years.”

Meanwhile, ONS rental figures released on Wednesday showed that private rental prices paid by tenants in the UK rose by 5.5% in the 12 months to August 2023, accelerating from 5.3% in the year to July 2023.

This was the biggest annual percentage change since the UK-wide records started in January 2016.

ONS head of housing market indices Aimee North said: “Annual inflation for UK rental prices continues to rise, setting a record high for the seventeenth month in a row. Wales is seeing the largest annual price growth nationally, while London rents continue their record-breaking surge.”

Private rental prices increased by 5.4% annually in England, by 6.5% in Wales, and by 6.0% in Scotland in August.

Within England, London had the highest annual percentage change in private rental prices in the 12 months to August, at 5.9%.

London’s annual percentage change in private rental prices was the highest since the records for London started in January 2006.