UK House Prices Experience 12-Year Low While Rents Soar
House prices in the UK have recently experienced a significant drop, reaching a 12-year low. According to the Office for National Statistics (ONS), the average price of a home has decreased by £6,000 compared to the previous year. The ONS also reported that this decline in house prices is occurring at the fastest rate in over 12 years. Simultaneously, rent prices are rising to record levels across the country.
Notably, house prices in England and Wales have both declined over the past year. However, Scotland and Northern Ireland have seen increases in house prices. In England, the average house price decreased by 2.9% to £302,000, while in Wales, it dropped by 2.4% to £213,000. On the other hand, Scotland experienced a 2.2% increase with an average house price of £194,000, and Northern Ireland saw a 2.1% rise, bringing the average house price to £180,000. Among the regions in England, London witnessed the most significant decrease in house prices, whereas the North East had the smallest decline.
This news comes at a time when inflation has unexpectedly risen. In December, the rate of Consumer Prices Index (CPI) inflation reached 4%, compared to 3.9% in November. This surprising increase has led to concerns regarding the potential impact of the Red Sea shipping attacks on inflation. If the cost of imported oil, gas, and goods increases, it could further exacerbate the inflation problem. Additionally, although mortgage rates have been decreasing lately, the quickening of inflation might make lenders more cautious, potentially delaying hopes of a Bank of England base rate cut.
Experts in the housing market have noted that stretched mortgage affordability has contributed to the downward pressure on house prices. However, they also highlight that falling mortgage rates have given buyers more confidence. Property agents Savills shared encouraging signs of buyers gaining confidence as mortgage rates fall, although the unexpected inflation figures might affect expectations of a rate cut by the Bank of England.
While mortgage rates have been decreasing overall, economists advise borrowers to remain mindful that rates can be volatile. Despite this, the housing market remains positive, with more people registering to buy homes compared to the previous year. Mortgage brokers and experts also project stability in mortgage rates, making them more attractive to potential homebuyers.
Meanwhile, the rental market in the UK paints a different picture, as rental prices have continued to rise. Data from the ONS reveals that private rental prices increased by 6.2% in the year ending December 2023, which matches the highest yearly percentage change since recording began. Scotland witnessed the highest rental price increase at 6.3%, while England saw a 6.1% rise. When excluding London from the equation, rental prices still rose by 5.7% over the same period.
London experienced a 6.8% increase in private rental prices, slightly lower than the previous record-high increase of 6.9%. In Wales, rental prices went up by 7.1%, slightly decreased from the previous 7.3% increase. Northern Ireland saw a rental price increase of 9.3% in the 12 months to October 2023, although this rate has been slowing down since reaching 10.0% in March 2023.
In conclusion, the UK housing market has witnessed a decline in house prices, reaching a 12-year low. However, rents continue to rise across the country. The impact of inflation and the Red Sea shipping attacks on the overall economy remains uncertain. While the market shows signs of buyer confidence due to falling mortgage rates, caution is advised as inflation rates and mortgage affordability continue to play significant roles. With rental prices consistently increasing, the rental market presents a different landscape compared to the declining house prices.
