ONS: house prices fall amid mortgage uncertainty

UK house prices continued to remain down against the year in January, the latest Office for National Statistics (ONS) House Price Index has shown.

The average property price of £281,913 was 0.6% (£2,000) down compared to January 2023, according to the ONS’s provisional estimates. However, annual house price deflation has slowed from a rate of 2.2%, with prices climbing 0.5% month-on-month (1.1% on a seasonally-adjusted basis).

Prices in England led the decline, falling 1.5% annually with property in London seeing an average fall of 3.9%. They grew 4.8% in Scotland, with Welsh prices dipping 0.8%.

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The ONS index is arguably the most comprehensive measure of UK house prices as it is based on final sale figures compiled by HM Land Registry. But its limitation is that it has a greater time lag than other HPIs, such as those produced by RICS and Rightmove. As well as being published two months after the data period, the prices it records may have been agreed several months before the sale was formally registered.

It comes after house prices fell 1.4% over the course of 2023, as headline CPI inflation remained stubbornly high and interest rates climbed to 15-year highs. In turn, this contributed to a spike in mortgage rates last year. Fresh uncertainty has seen mortgage pricing increase again since February, although the latest ONS data does not reflect this change.

Monthly house prices picture ‘beginning to diverge’ from annual figures

The latest ONS figures show house prices are down compared to 12-months previously. But the monthly figures suggest a recovery is underway in most parts of the UK.

For example, while average prices in the East of England dropped 2.2% year-on-year to £336,502, this figure was 1.2% up month-on-month. The only regions to buck this trend were the East Midlands, North East, North West and Yorkshire and the Humber, where prices all fell compared to December 2023. Wales recorded declines on both an annual (-0.8%) and monthly (-0.1%) basis.

The price picture also varied in terms of the type of property being bought. The category that saw the steepest yearly decline in value was flats and maisonettes, which were almost £4,000 (-1.7%) cheaper on average at £228,811. Terraced homes also posted a £3,000 (-1.2%) fall to £230,628.

It was a marginally different story for detached homes, which got almost £2,000 (0.4%) pricier, costing £438,088 on average. Semi-detached properties saw practically no price change year-on-year, remaining close to £274,200. Typical first-time buyer homes were 1% cheaper as of January at £235,020.

The ONS’s latest analysis also included data on the number of property transactions for the year to November 2023. These showed a dramatic drop off in the volume of sales, with Wales experiencing a 24.1% drop and England seeing a 22.9% decrease. Falls were also seen in Northern Ireland, where the number of confirmed transactions went down 15.2%, as well as Scotland (-12%). 

More recent analysis of the market picture in January by RICS suggested buyer demand has subsequently improved. The professional body for surveyors recorded its most positive reading for new instructions since March 2021. Meanwhile, HMRC estimated the number of transactions rose 1.9% between December 2023 and January 2024 when adjusted on a seasonal basis.

Housing market ‘notably quiet’ but demand could return

Charlotte Nixon, a mortgage expert at Quilter, said the ONS findings were evidence of a “notably quiet” market. However, she added that buyers who had been “scared off” by the cost of living and mortgage turmoil of recent years could return to the market now inflation appears to be on a downward trajectory.

“The mortgage market has suffered from incredible unpredictability with rates rising and falling rapidly and deals here today are gone tomorrow. This really tests buyer affordability and their ability to ride out uncertainty. Just recently rates have been on an upward trajectory again but whether this morning’s inflation figure changes this, only time will tell,” she said.

“Another period of more predictable rates for buyers coupled with a more optimistic outlook will help sellers feel confident they can get the deal they want for their property. Whichever way you look at it though the market is incredibly sensitive to the macro-economic data coming out at present and both buyers and sellers must feel prepared to negotiate on asking prices in either direction.”