ONS: Annual house price growth continues to slow, from 0.7% in July to 0.2% in August

House price growth continued to slow in August but renters are facing higher costs, the latest Office for National Statistics (ONS) data shows.

It is the latest sign of a slowing property market, with Nationwide and Halifax house price indices also reporting that prices are falling at the fastest levels since 2009.

The ONS data shows that average annual price growth slowed from 0.7% in July to 0.2% in August and dropped from 0.8% to 0.3% on a monthly basis to £291,044.

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This may not reflect what is happening on the ground now in the property market as the Land Registry data is based on completed sales that could have been agreed up to four months ago.

But it does mean prices are up by £9,000 from their trough of March £282,115 in March and have returned to a level similar to the pre-mini Budget peak in September 2022 of £291,909.

“House price rises have slowed, raising the risk of a tougher period in the coming months,” says Sarah Coles, head of personal finance, Hargreaves Lansdown.

“The annual figures are going to look better over the coming months, reflecting the fact that we’re a year on from the mini Budget.”

A clearer picture will emerge in the monthly data, Coles suggests.

“Since March, house prices have continued to rise on a monthly basis, but have slowed between July and August,” she says.

“Given the fact that the Bank of England figures show fewer mortgages approved during the month, RICS shows buyer demand falling and HMRC recorded fewer transactions, we could see this slow further and prices start to plateau again, or even drop.”

Where are house prices falling the most?

Average house prices over the 12 months to August 2023 were flat in England at £310,000, decreased by 0.1% in Wales to £217,000 and increased in Scotland by 1.1% to £194,000.

Meanwhile, average house prices increased by 2.7% to £174,000 in the year to the second quarter 2023 in Northern Ireland.

On a more local level, average prices in the East of England fell by the most at 1.6%.

Prices are also falling in London and the South East and South West of England.

At the other end of the country, values in the North East were up the most at 3.6% followed by Yorkshire and The Humber at 2.2%.

Rising rents

Tenants may see lower house prices as an opportunity to finally get on the property ladder.

But renters are also facing challenges of higher mortgage rates and increasing rents.

Separate ONS data released today shows private rental prices paid by tenants in the UK rose by 5.7% in the 12 months to September 2023, up 5.6% in August.

Rents increased by 5.6% in England, 6.9% in Wales, and 6.0% in Scotland on an annual basis.

Within England, London had the highest annual percentage change in rents in the 12 months to September 2023 at 6.2% - the highest on record since the data series began in 2006.

The North East saw the lowest annual rental growth at 4.7%.

“The supply and demand chain continues to strongly favour landlords,” says Harriet Scanlan, lettings manager at Richmond estate agency Antony Roberts.

“With limited rental properties available and high demand from tenants, it remains a landlord’s market, enabling property owners to enjoy favourable terms and conditions.”

When will the property market recover?

With inflation still sticky at 6.7% and mortgage rates still relatively high compared with recent years, pressure remains on the property market.

Guy Gittins, chief executive of estate agency giant Foxtons, says sellers are having to be more competitive with their property pricing to attract interest.

“This puts buyers in the driving seat when it comes to negotiations, but sellers that adjust their pricing accordingly are successfully transacting,” he says.

Charlotte Nixon, mortgage expert at Quilter, adds that house price data tends to “massively lag” the real world events happening today.

“The market is very subdued at the moment and this lack of demand is causing sellers to drop prices in a bid to attract those who might be adopting a wait and see approach,” she says.

“It is likely that we are going to see prices stall and fall throughout the country in the coming months. 

“Interest rates are probably going to stay higher for longer than originally anticipated but those who can afford to move despite elevated rates will eventually decide to take action especially if they are renting and their re-entry into the market will hopefully provide some buoyancy in the spring of 2024.”

She suggests that the tight rental market could ultimately push more people into trying to buy as people find that mortgage rates could end up being cheaper than rent though.