UK House Price Index: The Market Remains Price-Sensitive

The annual percentage change for average UK house prices was 0.2% (provisional estimate) in the 12 months to August 2023, compared with 0.7% (revised estimate) in the 12 months to July 2023.

The average UK house price was £291,000 in August 2023 (provisional estimate), which is little changed from 12 months ago, but £9,000 above the recent trough in March 2023.

Average house prices in the 12 months to August 2023 remained little changed in England to £310,000 (0.0%), decreased in Wales to £217,000 (negative 0.1%) and increased in Scotland to £194,000 (1.1%).

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 0.3% between July 2023 and August 2023, compared with an increase of 0.8% during the same period 12 months ago.

Annual house price inflation was highest in the North East where prices increased by 3.6% in the 12 months to August 2023.

The East of England was the English region with the lowest annual inflation, where prices decreased by 1.6% in the 12 months to August 2023.

The Royal Institution of Chartered Surveyors’ (RICS’) August 2023 UK Residential Market Survey reported a sharp downturn in buyer demand.

When viewed at the regional and country level, all parts of the UK continue to see significant pull-back in demand.

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 August 2023, on a seasonally adjusted basis, the estimated number of transactions of residential properties with a value of £40,000 or greater was 87,010.

This is 15.6% lower than 12 months ago (August 2022).

Between July 2023 and August 2023, UK transactions increased by 1.1% on a seasonally adjusted basis.

The Bank of England’s Money and Credit August 2023 release reported that mortgage approvals for house purchases, an indicator of future borrowing, decreased to 45,400 in August 2023, the lowest level in 6 months, from 49,500 in July 2023.

England

In England the August data shows, on average, house prices have risen by 0.2% since July 2023. There has been no annual price change, taking the average property value to £309,616.

The regional data for England indicates that:

• the North East experienced the greatest monthly rise with a movement of 1.3%
• the East of England saw the lowest monthly price growth, with a fall of -0.7%
• the North East experienced the greatest annual price rise, up by 3.6%
• the East of England saw the lowest annual price growth, with a fall of -1.6%

Price change by region for England

Repossession sales by volume for England

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

The highest number of repossession sales in June 2023 was in the North East.

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 fallen by -0.1% since July 2023.

An annual price fall of -1.4% takes the average property value to £535,597.

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 fallen by -0.1% since July 2023.

An annual price fall of -0.1% takes the average property value to £216,726

There were 10 repossession sales for Wales in June 2023.

Average price by property type for Wales

Funding and buyer status for Wales

Building status for Wales

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

“These slightly historic figures are more comprehensive than other surveys as they are based on completions rather than offers, and include all sales including cash and mortgages.

They show resilience at a time of great turbulence for the market on the back of rising mortgage rates.

The market remains price-sensitive although stabilising inflation and mortgage rates as well as the growth in real wages has improved affordability and prompted more viewings and offers, especially for small family houses.

Very few forced sellers and low stock levels mean prices are likely to continue softening rather than significantly correcting.”

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

“Softer pricing reflects higher interest rates, which have a greater impact on affordability than asking prices.

A pricing correction is also a natural next step after peak 2022 pricing levels, which were inflated artificially by policies such as the stamp duty holiday and very low interest rates.

Many are asking whether house prices will crash. Unlike in commercial property, where values have fallen by 20 to 30%, it’s unlikely that house prices will crash because housing is a necessity, and overall demand for places to live does not change as a result of the strength of the economy.

The other important reason is that 8.8 million (36%) homes in England are owned outright, meaning they will not be affected by higher mortgage interest rates.

Investors we work with are spotting opportunities to buy well in the current market then rent out homes, as demand for a roof over our heads does not change in response to interest rates, and quality rental homes are in short supply.”

Gareth Lewis, managing director of property lender MT Finance, comments:

“Property prices remain fairly flat as the market trundles along with a reduced number of transactions.

Until we get more consistency when it comes to interest rates and better, more affordable mortgage products, which are starting to filter through, there is unlikely to be a spike in transactions.

Once we are in a settled interest rate environment, it will breed more confidence and people will be happier to transact.

In the meantime, we don’t expect to see a price crash but rather a further softening in values.

The inbuilt desire to own your own home remains, and while buyers may be waiting and seeing for now, it is still the ultimate goal for many.”

Alex Lyle, director of Richmond estate agency Antony Roberts, comments:

“These numbers reflect what was happening in August and while we would expect a lull in the summer months with low activity, we’ve found that the housing market is not as exciting this autumn as it was in the spring.

The market is not as busy as it should be and while viewings have picked up, new stock must be at the right price or there isn’t the depth of demand for it.

Typically, we are seeing two to four enquiries per property, compared with 10 to 15 earlier on in the year.

That said, a good address at the right price will sell, whereas if it is an overpriced, slightly compromised property, then forget it.

Buyers are waiting to see what happens with mortgages and if interest rates are held again next month, it will be viewed as a little pigeon step in the right direction.”

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

“Swap rates, which underpin the pricing of fixed-rate mortgages, have risen on the back of the latest inflation data, with five-year Swaps rising to 4.68 per cent this morning from 4.57 per cent yesterday.

While another base rate rise could still be on the cards, it is looking as though it is close to its peak, which will be welcomed for hard-pressed borrowers, with lenders continuing to reduce their fixed-rate mortgage pricing.

There is a strong argument for the Bank of England to hold rates again next month in order to let the dust settle and the full effect of so many increases to filter through.”