UK house prices held up better than expected in official data for August, despite a market pushed into stagnation by higher mortgage rates and a cautious consumer.
(Bloomberg) — UK house prices held up better than expected in official data for August, despite a market pushed into stagnation by higher mortgage rates and a cautious consumer.
The average house price edged higher to £291,000 ($354,690), up 0.3% from July, figures from the Office for National Statistics showed on Wednesday. It left prices 0.2% higher than a year earlier, defying economists’ expectations of a 0.6% fall.
It suggests the housing market was moving sideways after a volatile summer in which mortgage rates rose sharply before beginning to cool.
The Bank of England halted its hiking cycle last month but is now guiding markets toward rates staying higher for longer, keeping up the pressure on the housing market. The ONS data also conflicts with unofficial measures from mortgage lenders Nationwide Building Society and Halifax showing year-on-year declines of 5%.
Industry experts said the market is stagnating as demand is curtailed by talk of recession and mortgage rates that are still triple their level from early 2022, according to BOE data.
“The property market is almost comatose at present,” said Stephen Perkins, managing director at broker Yellow Brick Mortgages. “House prices have been coming down but not by a large enough margin to inspire potential buyers to flock to the market.”
Tom Bill, head of UK residential research at Knight Frank, said that prices will “continue to come under pressure as monthly mortgage costs rise sharply.” He said the BOE’s struggle to rein in inflation had undermined confidence, a “vital lubricant in the UK housing market”
The ONS data, which are based on Land Registry records, showed a stark regional divide in England, with prices slipping back on an annual basis in London, the south and the east. The fastest house price growth was in the North East and Yorkshire and the Humber.
Economists said the rise in mortgage rates during the summer has not fully fed through to official data, meaning prices may have further to fall.
However, more forward-looking data from the Royal Institution of Chartered Surveyors suggests some tentative signs of the housing market improving as mortgage rates gradually ease. Its gauges of new buyer inquiries and sales bounced off recent lows in September.
In a separate release, the ONS said that the rise in rents continued to accelerate in September as higher borrowing costs forces landlords to either sell up, squeezing supply, or pass on the increase to their tenants.
In London, private rental prices rose 6.2% year-on-year, the fastest pace since records began in 2006. Rents rose 5.7% in the UK as a whole, also a record increase.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.