UK House Price Index: Market Backdrop Remains Challenging

The annual percentage change for average UK house prices was 0.6% in the 12 months to July 2023, compared with 1.9% in the 12 months to June 2023.

The average UK house price was £290,000 in July 2023, which is £2,000 higher than 12 months ago, but £2,000 below the recent peak in November 2022.

Average house prices increased in the 12 months to July 2023 to £309,000 (0.6%) in England and £192,000 in Scotland (0.1%), while the average house price decreased in the 12 months to July 2023 to £216,000 in Wales (-0.1%).

The average house price increased in the year to Q2 (Apr to Jun) 2023 to £174,000 in Northern Ireland (2.7%).

On a non-seasonally adjusted basis, average UK house prices increased by 0.5% between June 2023 and July 2023, compared with an increase of 1.9% during the same period 12 months ago.

Annual house price inflation was highest in the North East where prices increased by 2.7% in the 12 months to July 2023.

The South West was the English region with the lowest annual inflation, where prices decreased by 1.0% in the 12 months to July 2023.

The Royal Institution of Chartered Surveyors’ (RICS’) July 2023 UK Residential Market Survey reported a sharp downturn in buyer demand following the latest escalation in mortgage interest rates.

When viewed at the regional and country level, all parts of the UK display a firmly negative return for new buyer enquiries over the month.

The Bank of England’s Agents summary of business conditions 2023 Q2 reported weaker demand and stronger supply than a year ago, bringing supply and demand closer to balance.

This led to more stable prices relative to recent months.

HMRC’s UK Property Transactions Statistics showed that in July 2023, on a seasonally adjusted basis, the estimated number of transactions of residential properties with a value of £40,000 or greater was 86,510.

This is 16.3% lower than 12 months ago (July 2022).

Between June 2023 and July 2023, UK transactions increased by 0.8% on a seasonally adjusted basis.

The Bank of England’s Money and Credit July 2023 release reported that mortgage approvals for house purchases, an indicator of future borrowing, decreased to 46,400 in July 2023, from 54,600 in June 2023.

England

In England the July data shows, on average, house prices have risen by 0.4% since June 2023. The annual price rise of 0.6% takes the average property value to £308,633.

The regional data for England indicates that:

• Yorkshire and the Humber experienced the greatest monthly rise with a movement of 1.5%
• the East Midlands saw the lowest monthly price growth, with a fall of -0.5%
• the North East experienced the greatest annual price rise, up by 2.7%
• the South West saw the lowest annual price growth, with a fall of -1.0%

Price change by region for England

Repossession sales by volume for England

The lowest number of repossession sales in May 2023 was in the East of England.

The highest number of repossession sales in May 2023 was in the North West.

Average price by property type for England

Funding and buyer status for England

Building status for England

London

London shows, on average, house prices have risen by 1.1% since June 2023.

An annual price fall of -0.8% takes the average property value to £534,265.

Average price by property type for London

Funding and buyer status for London

Building status for London

Wales

Wales shows, on average, house prices have rise by 1.1% since June 2023.

An annual price fall of -0.1% takes the average property value to £215,632.

There were 3 repossession sales for Wales in May 2023.

Average price by property type for Wales

Funding and buyer status for Wales

Building status for Wales

Jean Jameson, Chief Sales Officer at Foxtons, comments:

“While the market backdrop remains challenging, slightly cooling ONS inflation figures and a growing consensus that the Bank of England has neared the top of its base rate increases has brought some needed respite.

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 5 years.

This indicates that London property remains an attractive option for many and that buyers and sellers are opting for established real estate agencies to support with transactions in this market.”

Tomer Aboody, director of property lender MT Finance, comments:

“Constant uncertainty in the market and lack of confidence in buyers is still taking full effect, as transaction volumes are at their lowest in five years, excluding the flurry of activity in 2020 during the pandemic.

Uncertainty as to when interest rates will stop rising and when banks will reduce rates further, is resulting in buyers and sellers sitting on their hands and waiting until things settle down.

Once again, and not surprisingly, the biggest rises in prices are in the detached house market, as people who are buying are looking to secure their ‘forever’ home are buying now rather than waiting for a change in the market, which might not come for a while.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, comments:

“This most comprehensive of all the house price indices provides an interesting snapshot of market activity as it also includes cash buyers who have proved so crucial lately now mortgages are so much harder to come by on competitive terms.

However, the figures are a little dated so don’t yet show how some buyers and sellers are slowly emerging from the quieter-than-usual summer period taking heart from an expectation that base rates may be at or close to their peak.

Today’s surprise drop in inflation won’t do any harm to that sentiment either.”

Anna Clare Harper, CEO of sustainable investment adviser GreenResi, comments:

“The most obvious and immediate cause of this slowdown in growth is higher interest rates, which make buying and owning property less affordable regardless of house prices.

2 million property owners face two to three times their previous housing costs by the end of 2023 due to variable rates rising or fixed rate terms coming to an end.

These stressed property owners are often seeking a fast sale; and investors we work with are able to negotiate attractive deals, which might be 20-30% lower in price than this time last year.

However, house prices are not expected to tank, since the vast proportion of homes are owned outright by households with ‘housing privilege’.

Outright home ownership with no mortgage is the largest – and luckiest – group of property owners. 8.8 million (36%) homes in England are owned outright, and they are unaffected by mortgage interest rates.

For this reason, fears of a ‘house price crash’ are unrealistic.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, comments:

“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, with five-year Swaps falling to 4.52 per cent from 4.64 per cent yesterday.

While another base rate rise is expected, it is looking as though it is close to its peak, which will be welcome news for hard-pressed borrowers.

There is a strong argument for the Bank of England to now pause rate rises in order to let the dust settle.

Consecutive base rate rises have been painful; it’s time to let them take effect, rather than causing continued anxiety and distress for borrowers.”

Director of Benham and Reeves, Marc von Grundherr, comments:

“Much has been made about the decline of the property market, but the truth of the matter is that house prices continue to sit at their highest levels this side of the Millennium and only marginally off the market peak seen towards the backend of last year.

There are sure signs that stability is returning to the London market, with the capital seeing one of the strongest rates of monthly house price growth.

This has been largely driven by international buyers who have been less deterred by the current mortgage landscape and the higher rates that have caused many domestic buyers to sit on the fence.

So yes, mortgage affordability remains an issue for many buyers, however, those looking to sell should rest assured that their home will still command a solid good price in the current market, whether that be in London or any other area of the nation.”

Managing Director of Barrows and Forrester, James Forrester, comments:

“The true test of the property market is how sold prices are performing and, as it stands, we’re yet to see any notable dip in this respect.

Certainly not the 30% crashes predicted by some industry ‘experts’.

There’s no doubt the market is cooling due to a reduced level of market activity on the side of the nation’s buyers, but given the turbulent economic times of late, today’s figures can be viewed as extremely positive.”

CEO of Octane Capital, Jonathan Samuels, comments:

“Not only have house prices remained impervious to the wider economic landscape, but inflation has fallen by a greater degree than expected and the Bank of England may well choose to keep the base rate frozen at 5.25% as a result.

This will be welcome news for the nation’s homebuyers who have already started to benefit from many lenders reducing their fixed rate offerings this week in response to a drop in swap rates.

Looking forward, further reductions to mortgage rates could be on the cards as the economic picture improves, although it’s too soon to say for sure.”

Managing Director of House Buyer Bureau, Chris Hodgkinson, comments:

“The property market has become an increasingly difficult place for buyers in recent months and this dent in market activity has caused the rate of house price growth to slow.

Given the lagged nature of house price reporting a reduction could well be on the cards, however, a return to normality is no reason to run for the hills in anticipation of a market crash.”

Co-founder and CEO of Searchland, Mitchell Fasanya, comments:

“While the UK property market may be treading water to a certain extent where topline house price growth is concerned, it’s clear that the new-build sector is keeping the ship afloat.

New-build house prices are up 13.8% annually versus a 1% rate of growth across the existing market and this should help reassure the nation’s housebuilders that now is as good a time as any to bring new stock to market.”

Chris Druce, Senior Research Analyst at Knight Frank comments:

“Today’s release from the ONS confirms that house prices continue to fall.

We expect they’ll travel further still, with a reduction of 10% through the rest of this year and next.

This is despite the growing expectation that we are near the top of the interest rate cycle, which has reduced buyers’ spending power and depressed activity in the UK housing market.

However, improved confidence, strong wage growth, high employment by historic standards, the availability of longer mortgage terms and forbearance from lenders will place a floor on how low prices will go.

While we expect a muted period ahead for the residential market we do not expect a cliff edge moment.”