New statistics are also released on rental prices
The average house price in the UK fell by 2.1%, or an equivalent of £6,000, to £285,000 in the year to November 2023, the latest figures published by the Office for National Statistics (ONS) show.
House prices dropped further in November compared with the previous month, which recorded a 1.2% annual fall. ONS said UK house price annual inflation has been generally slowing since July 2022, when annual inflation was 13.8%.
Over the past year, average house prices decreased in England to £302,000 (-2.9%), decreased in Wales to £213,000 (-2.4%), but increased in Scotland to £194,000 (+2.2%). Average house prices increased by 2.1% to £180,000 in the year to Q3 2023 in Northern Ireland.
The UK House Price Index for November 2023 also revealed that among all English regions, the North East saw the smallest decrease in average house prices in the 12 months to November at -0.4%, while London saw the largest fall at -6%.
Average UK house prices decreased by 2.1% in the 12 months to November 2023 (provisional estimate) 🏠
— Office for National Statistics (ONS) (@ONS) January 17, 2024
This is down from a fall of 1.3% in the 12 months to October 2023.
➡️ https://t.co/ubISV2vxoe pic.twitter.com/Fi0CqXmbuQ
“A drop off in buying activity in the lead up to Christmas, coupled with tough market conditions, contributed to a further fall in November,” Emma Cox, managing director of real estate at Shawbrook, commented. “While this means December’s figures could also decline, the outlook for 2024 is looking more positive. Interest rates are likely to drop or at least hold, and a reduction in mortgage rates should fuel new buying activity.”
Marc von Grundherr, director at estate agency Benham and Reeves, said there had been an air of positivity hanging over the UK property market for a number of months now, and this was unlikely to evaporate due to a marginal decline in sold prices.
“Not only is there a seasonal influence at play with today’s figures, but what we’re seeing is a return to the norm following a pandemic inspired period of house price boom,” he added. “The market is currently finding its feet as buyers adjust to the reality of higher mortgage rates, while sellers are also having to adjust their expectations and, as the two meet in the middle, we expect the market to stabilise.”
Tony Hall, head of business development, Saffron for Intermediaries, however, pointed out that the latest ONS house price index represents data from November 2023, or from two months ago.
“In an ever changing market, two months is a long time, and we are seeing a much more positive picture now than this data suggests,” Hall said.
“Less volatile swap rates and a measured approach to the base rate from the Bank of England is encouraging competition among mortgage lenders and driving prices down. This, in turn, is encouraging aspiring homeowners and movers into action and driving market activity.
“Rising confidence has already been reflected in recent Rightmove data, which suggests that average house prices have gone up this month too. That being said, as borrowers look to navigate the evolving market, it is important that advisers are on hand to guide them. Many will be looking to their adviser for reassurance and support, and it is important for industry professionals to ensure that everyone is able to find the best possible deal tailored to their individual needs.”
What’s happening in the UK rental market?
In the UK private rental market, prices paid by tenants rose by 6.2% in the 12 months to December.
ONS, in its latest Index of Private Housing Rental Prices report, revealed annual private rental price increases in all the UK countries and English regions.
Rents grew by 6.1% in England, by 7.1% in Wales, and by 6.3% in Scotland. Within England, London had the highest annual percentage growth in private rental prices at 6.8%, while the North East saw the lowest at 4.6%.
“Average rents paid by tenants in the UK rose by 6.2% – this might not seem like much, with inflation of 4%, however, this statistic underestimates the reality faced by renters,” Anna Clare Harper, chief executive of sustainable investment adviser GreenResi, said. “For the one in four renters who move each year, rental price increases are often twice as high.
“This is a huge problem: financial security is very difficult to achieve in a context of double-digit price rises for the largest household expense. Worse still, affordability is just one of the problems facing Generation Rent. There are not enough homes – rental supply is down 28% in the past 18 months. And the quality of rental homes is inadequate: 23% of private rental sector homes fail to meet the Decent Homes Standard.
“The problems of pricing, volume, and quality of supply facing renters across the UK require professional investors to step in to solve them, since traditional sideline private landlords with fewer than five properties in their personal names exit in droves.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, added that for aspiring first-time buyers, the sad news is that average rents are still rising, making deposit saving even more difficult.
“The usual suspects are at work here – shortage of stock, partly caused by landlords leaving the sector in response to worries over the tax and regulatory regime, while at the same time, demand seems unstoppable,” Leaf said. “However, in the early weeks of 2024, we have noticed an increase in supply which has helped to keep a lid on some of the more ambitious rents and the gap with demand is narrowing.”
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