Recent data from the Office for National Statistics (ONS) reveals that London house prices have witnessed a 1.4% dip over the year leading up to August. This decrease is noteworthy, considering the capital’s reputation for steep property prices. Despite this decline, however, London retains the crown for the most expensive region in the UK to purchase a home, boasting an average sold price of £536,000.
To put this in perspective, this price is more than triple the average in the North East, currently the least expensive region, where homes typically go for about £165,000. Such stark regional disparities highlight the continued existence of a “property divide” in the nation.
National Housing Trends: A Mixed Bag
When we zoom out to view the UK as a whole, the picture becomes less dramatic. Across the country, average house prices have essentially flatlined, with a marginal increase of 0.2% observed. The average UK house price stands at £291,000 as of August 2023, barely budging from the previous year, yet notably £9,000 higher than the low point recorded in March 2023.
Aimee North, the ONS head of housing market indices, noted that while the national average stagnates, there are regional variances. For instance, Scotland is experiencing a surge in annual inflation, while in contrast, prices are tumbling across southern and eastern England.
Inflation and the Property Market: Understanding the Links
The housing market doesn’t exist in a vacuum; it’s influenced by broader economic trends. One key factor is inflation. As of last data, UK inflation stubbornly persisted at 6.7%, a stagnation that follows three months of relieving pressures on household finances.
This stubborn inflation has prompted the Bank of England to use interest rate hikes as a fire extinguisher, trying to douse the inflationary flames. However, this has side effects: mortgage holders are witnessing a jump in their expenses. Compounding this, a scarcity in the rental sector is driving rental prices upwards, putting additional stress on those not yet on the property ladder.
Experts like Tom Bill, head of UK residential research at Knight Frank, and Emily Williams, director of research at Savills, suggest a complex future. They foresee continued pressure on house prices due to rising mortgage costs but also predict a potential market resurgence around 2024, driven by improving economic sentiment and easing mortgage rates.
The Rental Market: A Pressure Cooker
The rental segment of the property market is a pressure cooker right now. According to the ONS, private rental prices have skyrocketed by 5.7% year-on-year as of September 2023. Particularly in London, the increase is even steeper at 6.2%, marking the most pronounced annual hike since such data began to be recorded.
What’s behind this squeeze? Greg Tsuman of Martyn Gerrard Estate Agents points to a severe supply shortage, particularly for affordable properties, leading to intense competition among prospective tenants. This supply-demand imbalance is pushing renters towards more cost-effective regions, instigating a domino effect on prices even in the suburbs.
A Sellers’ Market, But Buyers Are Cautious
Despite the challenges, there’s a silver lining for sellers, as noted by Nick Leeming, chairman of estate agent Jackson-Stops, and Iain McKenzie, CEO of the Guild of Property Professionals. Committed sellers are still in the game, and flexibility in accepted offers seems to be aiding market fluidity.
However, the rental crisis remains alarming, as emphasized by Nathan Emerson of Propertymark. The growing chasm between the number of available rental homes and surging demand from potential tenants is a concern that continues to escalate.