This report is to help give everyone – industry and consumers – a quick five-minute guide to what’s happening in the property market, according to the property indices, along with property expert Kate Faulkner’s comments.
1.9% summer price drop as stretched affordability begins to improve
“Average new seller asking prices fall by 1.9% (-£7,012) this month to £364,895, the biggest fall in August since 2018, as summer sellers tempt buyers preoccupied by holidays, inflation, and the highest Base Rate since 2008.”
Prices hold firm in the north but slide in the south
“Asking prices across England and Wales have taken what could be regarded simply as a seasonal dip of 0.3% since last month, although at the same time rising mortgage costs are inevitably dampening vendors’ expectations, most notably in the South.”
Tighter lending environment continues to weigh heavily on home buyer activity
“National house price indicator retreats further over the month.”
August sees further weakness in house prices
“August saw a further softening in the annual rate of house price growth to -5.3%, from -3.8% in July, the weakest rate since July 2009. Prices fell by 0.8% over the month, after taking account of seasonal effects.”
UK house prices fell in August as impact of higher rates flows through
“On an annual basis prices fell by -4.6%, the biggest year-on-year decrease since 2009, though it should be noted that this is relative to the record-high property prices seen last summer.”
Annual UK house price inflation slows to +0.1%, lowest since 2012
“While house price growth has slowed rapidly over the last year, the primary impact of higher mortgage rates has been lower sales volumes.”
Kate’s summary thoughts on indices headlines this month:
Reading the reports and headlines this month, it’s really important to remember where the data is coming from and making sure the headlines match. For example, the Nationwide and Halifax falls are being reported as ‘house prices are falling by….’. But that isn’t accurate, they are reporting mortgaged property prices ONLY. Bearing in mind that 30%+ sales are cash, in my view, it is incorrect to say ‘house prices’ are up or down by xx%, mortgaged property prices may be, but cash sales can and are reacting very differently!
Here are my 14 most interesting and useful stats from this month’s indices:
"Despite the ‘doom and gloom’ “Rightmove remind everyone that average prices are still £59,000 (19%) higher than in the pre-pandemic market of August 2019.
"Have mortgage rates peaked? “The average five-year fixed mortgage rate is now 5.81%, falling from 6.08% this time just three weeks ago and currently showing signs of an improving trend.
“A key factor preventing more significant price falls so far this year is that the number of available properties for sale remains historically constrained and is currently 10% lower than in 2019.”
“In the first half of 2023, the number of completed housing transactions was nearly 20% below pre-pandemic (2019) levels and c.40% lower than in the first half of 2021 - though the latter reflects the boost to activity from pandemic-related shifts in housing preferences, the stamp duty holiday and ultra-low borrowing costs.”
“Home mover completions (with a mortgage) in the first half of 2023 were 33% lower than 2019 levels, whilst first-time buyer numbers were c.25% lower. Buy-to-let purchases involving a mortgage were nearly 30% below pre-pandemic levels. By contrast, cash purchases were actually up 2%.”
“Income growth has remained strong over recent months, which has seen the house price to income ratio for first-time buyers fall from a peak of 5.8 in June last year to now 5.1. This is the most affordable level since June 2020, and will be partially offsetting the impact of higher mortgage costs.”
“Key indicators such as marketing times and stock levels continue to weigh in lower than observed in pre-COVID years 2018 and 2019. Meanwhile, following the December 2022 drop, pricing remains relatively firm overall with no notable increase in price-cutting of on-market properties.
“The Typical Time on Market for unsold property in England and Wales increased by just two days during July, consistent with seasonal expectations. The current median is a relatively healthy 80 days, which is considerably lower than at any point during pre-pandemic 2019.
“The supply rate of new instructions entering the market remains very restrained: down 2% vs. July 2022 and down 4% vs. July 2018. The largest year-on-year rise was in the East of England (+5%).
“Looking at the real home price growth chart, we can clearly see that significant falls in real terms began around April 2022 and a major price correction has been taking place ever since, with the greatest monthly falls around March this year.”
“Market activity continues to track in line with 2019 levels but remains well below levels of activity recorded over the more recent pandemic years.
“All regions across southern England are registering year-on-year price reductions of up to -1%. All other regions and countries of the UK are posting low, single digit price growth. Scotland is registering growth of +1.7%.
“Our view that price reductions will remain concentrated across southern England where affordability challenges are greatest. Lower house prices and mortgage rates are needed to stimulate demand and sales.
“Our data on the number of homes being sold ‘subject to contract’ over the year to date shows the market is still on track for 1m sales completions in 2023”
For those that are interested in the England market, please see our regional price analysis below.
"Wales, which recorded some of the biggest gains in property prices during the pandemic-driven race for space, has seen property prices fall by -4.7% over the last year (average house price of £212,967).
"In Northern Ireland property prices have fallen by -1.5% annually (average house price of £182,700). In Scotland property prices fell by just -0.6% over the last year, the slowest pace of decline in the UK (average house price of £201,932)."
Prices rise in June for third consecutive month
“The average house price in Scotland in June 2023 has increased by £3,466 - or 1.6% - over the last twelve months. The 1.6% annual rate of growth is the same as the revised rate for May 2023, although in cash terms it is £60 less than the gain of £3,527 seen in May.
“In June 2023, 16 of the 32 local authority areas in Scotland were seeing their average prices rise above the levels of twelve months earlier, four fewer than in May. Interestingly, only three of the top ten areas ranked by value had price falls over the year, whereas seven of the bottom ten areas ranked by value saw prices fall. There would thus appear to be a trend in June that it is the high-value areas that have had rising prices over the year, with the lower value areas seeing prices fall. This month, Edinburgh has returned to a positive movement in its prices over the previous twelve month, after three consecutive months of price falls.
“The area on the mainland with the highest annual increase in average house prices in June 2023 was Inverclyde, at 14.6%, with the largest gains over the year being in flats, up from an average £84,000 in June 2022, to £97,000 in June 2023. The average flat price in Inverclyde in June 2023 was assisted by the sale of a four-bedroom property with views out to the River Clyde in Fort Matilda, Greenock, for £430,000 – the highest priced flat sold in Inverclyde over the last eighteen months.
“Looking at the change in prices on a weight-adjusted basis over the last twelve months – which incorporates both the change in prices and the number of transactions involved - there were four local authority areas in June which accounted for 53% of the £3,466 increase in Scotland’s average house price over the year. The four areas, in descending order of influence, are: – East Lothian (16%); Fife (15%); Glasgow (12%) and Edinburgh (10%).”
The property market is typically very difficult to report on ‘in summary’, especially when it’s ‘going up’ and ‘going down’ as what’s happening is so individual to a property not just to an area. Prices then depend on whether you are buying with cash or a mortgage, so even regional reporting isn’t likely to be that helpful to buyers, sellers and investors.
Add to this, as all the indices measure the market at different times and in different ways (some UK, some England and Wales, some mortgaged only), their reports of prices being up and down are all over the place just now and it will take a few more months until we see some consistent reporting across the indices. Hence, the North East is being reported as up by 4.7% according to the Land Registry, up by 2.6% (Rightmove), up by 1.8% according to Home.co.uk but down by 3.3% according to the Nationwide. A range of price reporting from -3.3% to 4.7% is huge!
However, the main ‘summary’ that you can conclude from the regional data is that areas which are typically high priced and require a mortgage are suffering a lot more, hence the ‘north-south divide’ is coming back into play.
It's important to constantly remind local media, buyers and sellers that whatever is being ‘reported’, within each region, prices are likely to be going up, down and staying the same, or at least the last the two just now!
Commentary on the regional performance by indices is below:
Southern regions register the larger price falls
“There is a clear north-south divide in house price inflation. All regions across southern England are registering year-on-year price reductions of up to -1%. All other regions and countries of the UK are posting low, single digit price growth.
“This pattern of price changes reflects the greater impact of higher mortgage rates on higher-value housing markets. Buyers in southern England need larger mortgages, bigger deposits and higher incomes to buy. This effectively prices more buyers out of the market, weakening demand and pushing down prices. In contrast, levels of market activity are holding up better in more affordable markets, in particular, Scotland. These trends will continue over the rest of 2023 and into 2024.”
Prices holding up where first-time buyers can still buy
“We believe that the variation in house price growth across the UK is partly explained by the ability of first-time buyers (FTBs) to buy at higher mortgage rates. FTBs account for 1 in 3 sales a year, most of whom originate from the private rental market. This means the dynamics of renting and buying will impact on demand and prices.
“Low mortgage rates over recent years made mortgage repayments for buying much cheaper than renting. This supported FTB demand and led to many FTBs opting to buy 3+ bed homes, bypassing the market for flats and smaller houses. Mortgage rates over 5% have now reversed this trend at the national level, making renting 10% cheaper than buying at a UK level, despite high growth in rents in recent years."