Average UK house price is £7,000 below peak seen last September

Property values increased by 1.9% annually in May this year, compared with a 14.1% annual uplift seen in July 2022.

The average UK house price in May 2023 was £286,000 (Daniel Leal-Olivas/PA) (PA Archive)

UK house price inflation in May this year was running at about one-seventh of the levels seen last summer, according to official figures.

Property values increased by 1.9% annually in May this year, the Office for National Statistics (ONS) said.

Back in July 2022, annual house price growth was around seven times this figure, with annual house price inflation running at 14.1%.

The average UK house price in May 2023 was £286,000, which is £6,000 higher than 12 months earlier, but £7,000 below a recent peak seen in September 2022.

Average house prices increased over the 12 months to May 2023 to £304,000 in England (1.7% annual growth), £213,000 in Wales (1.8%), £193,000 in Scotland (3.2%) and £172,000 in Northern Ireland (5.0%).

Within England, the North East recorded the highest annual percentage increase in house prices in the 12 months to May 2023 (4.0%) while the East had the lowest, with 0.0% growth.

On a seasonally-adjusted basis, the average UK house price fell by 0.4% in May 2023, following a month-on-month increase of 0.5% in April 2023.

ONS head of housing market indices Aimee North said: “UK annual house price inflation slowed again in May for the seventh consecutive month.

“While the average UK house price remains higher than 12 months ago, prices are now £7,000 below the recent peak in September 2022.

“UK rental prices increased again, with the highest annual inflation since records began in 2016.

“Nationally, Wales experienced the highest annual inflation in June. In England, annual inflation was highest in the West Midlands and lowest in the North East.”

The ONS’s figures, covering the month of June 2023, showed private rental prices paid by tenants in the UK rose by 5.1% annually, up from 5.0% in the 12 months to May 2023. It was the biggest annual percentage change since records started in January 2016.

Rental prices increased by 5.1% annually in England, 5.8% in Wales and 5.5% in Scotland in June.

Within England, the highest annual percentage change in private rental prices in the 12 months to June 2023 was in the West Midlands, at 5.4%, while the North East recorded the lowest, at 4.4%.

London’s annual percentage change in private rental prices was 5.3% in the 12 months to June 2023, its highest annual rate since September 2012.

The figures were released on the same day it emerged inflation has eased by more than expected to its lowest level for 15 months.

Consumer Prices Index (CPI) inflation was 7.9% in June, down from 8.7% in May and its lowest rate since March 2022.

Nicky Stevenson, managing director at estate agent Fine and Country, said: “House prices continued to rise in May compared to a year ago, although mortgage rate rises are stifling growth as it eats into what buyers can afford.

Affordability is a challenge for many buyers relying on mortgages, so sellers keen to get a deal done in a timely fashion must price carefully

Jason Tebb

“Today’s larger-than-expected fall in inflation will spark hopes that the Bank of England will be less inclined to hike rates further and that there will be more stability in the mortgage market as a result.”

Jeremy Leaf, a north London estate agent, said: “On the ground, appetite remains but worries over how far and how fast repayments will rise is highly relevant. Meanwhile, many sellers are not prepared to reduce to what is clearly a new market ‘norm’.”

Jason Tebb, chief executive of property search website OnTheMarket.com, said: “After so many interest rate rises, affordability is a challenge for many buyers relying on mortgages, so sellers keen to get a deal done in a timely fashion must price carefully.”

Riz Malik, director of Southend-on-Sea-based broker R3 Mortgages, said: “The primary catalyst to revive the UK housing market will either be a reduction in interest rates or a decrease in prices, with the latter the more likely scenario in the short term.”

Gabriella Dickens, a senior UK economist at Pantheon Macroeconomics, said: “We remain comfortable with our forecast for a peak-to-trough drop in house prices of around 10%.

“Note, though, that even if prices do fall that far, they still will be around 15% above their pre-Covid level.”

Iain McKenzie, CEO of the Guild of Property Professionals, said: “Affordability has been the biggest barrier to home ownership in recent times, inflating house prices beyond what people can afford and stopping prospective buyers from saving for a deposit.”

Nathan Emerson, CEO of estate and letting agents’ body Propertymark, said: “Our members continue to tell us of the huge disparity in the number of properties available to rent and the growing number of renters looking for a home, ultimately continuing to put pressure on rent prices.”

Chris Druce, senior research analyst at estate agent Knight Frank, said: “Demand continues to outstrip supply in the rental market, which has driven the increase in annual rental prices to a series high. There is little to suggest this will abate.”