London prices fall 2.2% while lenders flag a landlord investment gap ahead of the Budget
UK house price growth slowed for a fourth consecutive month, while private rent inflation held steady, according to Office for National Statistics (ONS) figures published Wednesday.
The average UK house price was £273,000 in August, up 0.9% year on year, down from 1.2% in July. The ONS said the slowdown was driven by weaker annual rates in six of the nine English regions. The average monthly private rent was £1,406 in September, up 3.8% (£52) from a year earlier and unchanged from August.
House prices: London drags, North East leads
England’s average price was £294,000, up 0.4% year on year, down from 0.9% in the 12 months to July. Wales rose 3.1% to £216,000 and Scotland 2.9% to £198,000. London was the weakest region, down 2.2%, as flat prices fell 5.0%. Flats make up about half of London sales. The North East was strongest at 3.2%, down from 4.7%.
Chris Storey, chief commercial officer at Atom bank, said: “This house price rise is surprising, and it’s difficult to see where the impetus for sustained house price growth will be in the months ahead, given the pressures on household budgets and the impact higher interest rates are having on buyer confidence. That pressure is being exacerbated by rising inflation, which has grown faster than expected to 3.5%.”
Stay ahead of the UK mortgage market. Subscribe to the Mortgage Introducer daily newsletter for broker news, rate updates, and the industry latest delivered to your inbox every morning.
The ONS separately reported that consumer price inflation rose to 3.5% in the 12 months to September, from 3.1% in August. Motor fuel was the main driver.
Storey also pointed to next week’s Budget on 28 October, where the government is due to confirm its Your First Home scheme. Announced on 26 September, it is expected to offer first-time buyers of new-build homes in England a 20% equity loan with a 2.5% deposit.
“For first-time buyers, house price growth of any kind may mean homeownership feels even further away,” Storey said. “While the proposed Your First Home scheme is a welcome boost to aspiring homeowners, its ultimate success will depend on how effectively it supports those who could not buy otherwise, rather than those already on track to get onto the housing ladder. There are important lessons to be learned from the Help to Buy scheme.”
Rents: North West leads
English rents averaged £1,466, up 4.0%. Wales rose 4.1% to £848. Scotland rose 0.7% to £1,011, the lowest annual change recorded since the series began in 2016. Northern Ireland rose 1.7% to £879 in the 12 months to July. The North West had the highest annual inflation at 5.7%. London and the South East were lowest at 3.5%, though London’s average rent was highest at £2,338.
Alex Upton, managing director of specialist mortgages and bridging finance at Hampshire Trust Bank, said: “Continued rental growth highlights the pressure that remains on the private rented sector, even as the market becomes more balanced in some areas. Rightmove’s latest figures suggest that the supply of rental homes is still struggling to grow, with London facing particularly acute pressures. The concern is that we are not seeing enough new landlord investment to make a meaningful difference to the availability of homes.”
Rightmove’s third-quarter tracker put available rental homes nationally down 2% year on year, and down 9% in London.
Upton added: “There is no shortage of demand for good-quality rental accommodation, but that alone is no longer enough to encourage landlords to invest. Higher borrowing and operating costs have changed the calculations, and experienced investors are looking much more carefully at where they commit capital.”
What it means for brokers
Slowing price growth, falling London flat values and a Budget-led first-time buyer scheme point to a shifting purchase market. Steady rent growth and thin supply keep landlord demand for finance alive. The Bank of England held Bank Rate at 3.75% on 17 September. Its next decision is on 5 November.
