UK house price falls are slowing down as rents rise at record pace

New figures show the average UK house price fell by 0.2% in the 12 months to February

The average UK house price fell by 0.2% in the year leading up to February, lessening from a decrease of 1.3% in the period leading up to January.

According to the Office for National Statistics (ONS), the average house price across the UK stood at £281,000. During the same period, the average house prices in England fell to £298,000 reflecting a 1.1% drop, decreased in Wales to £211,000 marking a 1.2% decline, while they climbed in Scotland to reach £188,000, an increase of 5.6%.

The ONS said that the rise in Scotland’s annual inflation rate over recent months “is more reflective of Scotland’s average house price falling this time last year, rather than increasing in recent months”. Meanwhile, Northern Ireland saw average house prices rise by 1.4% reaching £178,000 in the period leading to the fourth quarter of 2023.

Furthermore, across the UK, private rents recorded an estimated surge of 9.2% in the year ending March. This increase is marginally higher than the 9.0% jump witnessed in the year ending in February a record high since UK data collection began in January 2015.

The average private rent in Britain was calculated as £1,246 in March, a hike of £104 when compared with the same time the previous year. March data showed that a typical private rent in England was £1,285, 9.1% (£107) more than what it was a year ago. This represents the most significant increase recorded since the initiation of these records in 2006.

In Wales, the climb in rent prices remained consistent, with a 9% (£60) increase compared to the previous year. As of March, the average private rent in Wales stood at £727. This annual growth rate has held steady since the 12 months leading up to February, according to the ONS.

Scotland saw the average private rent reach £947 in March, which is a 10.5% (£90) hike from the previous year. The annual inflation rate in Scotland has been on a gradual decline after peaking with a record 11.8% increase in August 2023, the report highlighted.

Data for Northern Ireland was only available until January 2024. Here, average private rents soared by 10.1% over the 12 months to January marking the most significant annual increase since records began in 2016.

Commenting on the housing market trends, ONS head of housing market indices Aimee North remarked: “Our latest UK housing market data show a mixed picture. Average UK house prices fell again over the year, but less steeply than in previous months. Meanwhile UK rental prices continue to set new records.”

PwC UK economist Jake Finney weighed in on the slight 0.2% annual dip in UK house prices, suggesting it could indicate “that we are approaching the end of the housing market correction”. He further noted: “Ultimately, the extent of the recovery will depend upon the pace and scale of the Bank of England’s rate cuts which are expected later this year. On the flip side, private rental inflation continues to reach new highs, adding to the cost-of-living pressures facing households.”

The figures were released on the same day the ONS said Consumer Prices Index (CPI) inflation eased back to 3.2% in March, from 3.4% in February. It was the lowest level of inflation since September 2021, although economists had predicted a slightly lower reading of 3.1% for the month.

Andrew Montlake, the managing director at Coreco mortgage brokers, said: “Figures such as these inevitably make the Bank of England jittery and push the chances of a summer rate cut back into the long grass.”

Rightmove’s mortgage guru Matt Smith said: “It’s positive to see inflation continuing to fall this morning, albeit not by quite as much as expected, as the blocks continue to build towards the anticipated first base rate cut later this year. The market is proving resilient despite broader global uncertainty, however continued stability in mortgage rates should be seen as a positive outcome over the next few weeks.”

Tom Bill head of UK residential research at Knight Frank, pointed out: “Higher borrowing costs, increased supply and a wave of owners rolling off sub-2% mortgages agreed in early 2022 are all putting downwards pressure on house prices.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said that until swap rates, which lenders use to price mortgages, are consistently falling, “lenders are unlikely to reduce mortgage rates further”.

David Hollingworth, from L&C Mortgages, highlighted the Bank of England’s cautious stance: “The Bank (of England) is likely to take the threat of inflation remaining higher for longer seriously and has repeatedly suggested it won’t act until it’s sure that inflation is under control.”

He also touched on the impact of market expectations on fixed-rate mortgages: “Market expectation will be important in determining fixed-rate pricing. Fixed rates have fallen substantially since last summer but have largely stabilised. With uncertainty still in the air as to how quickly the base rate may fall, those holding out for further cuts may find themselves in for a long wait.”

Nick Leeming, chairman at Jackson-Stops, shared some positive trends in the property market: “Across the Jackson-Stops network in March we saw a positive uptick in the number of new instructions from sellers and sales agreed, this should soon trickle down into the number of completions we are seeing over the next few months.”

He also noted the importance of fair pricing in attracting buyers: “It remains clear that where properties have been priced fairly, and in line with local market conditions, there continues to be high interest from committed buyers who are pressing on with their searches.”

Jonathan Hopper, chief executive of Garrington Property Finders, said that until interest rates start falling again, many people who have delayed home moves will remain on the fence. He added: “The prospect of election uncertainty later this year may make the top of that fence very crowded indeed in coming months.

“The property market is heading in the right direction, but progress is likely to be slow and meandering, with wide variations across regional and local markets.”