Annual house price inflation drops in August

This was down from the revised estimate of 0.7% house price inflation seen in the 12 months to July 2023. The decrease also follows the general trend of annual house price inflation slowing since July 2022, when annual house price inflation was at 13.8%.  

In addition to this, the average cost of a house in the UK remained little changed year-on-year in August 2023, hitting £291,000. However, this is still £9,000 above the recent low point seen in March 2023. Broken down by country, England’s prices remained little changed at £310,000, while the cost buying a home in Wales went down by 0.1% to £217,000 but went up by 1.1% in Scotland to £194,000.  

The northeast, meanwhile, saw the highest annual percentage change of all the English regions in the 12 months to August – up 3.6% – while the east of England saw the biggest drop, going down by 1.6%.  

London continues to remain the most expensive region in the UK, with an average house price of £536,000 in August, although it does have an annual inflation rate down 1.4% in the 12 months to August. Its annual inflation rate slowed because London prices decreased between July and August, while prices increased between the same months last year.  

Responding to the figures, Atom Bank’s head of mortgages Richard Harrison said: “Prices continue to rise more slowly, with today’s data reflecting the challenging time the property market has experienced so far in 2023, with rising rates negatively impacting how much buyers are able to borrow as well as customer confidence.  

“As a result, activity in the market has remained subdued and the latest Bank of England approval figures point to a marked reduction in purchase activity, with August’s numbers some 37% lower than the same period last year. This is particularly true in the south of England, which has seen house prices fall as people face ongoing affordability challenges. 

“However, there is some cause for cautious optimism. Softening prices present an opportunity for first-time buyers, and many experts now think that Base Rate has reached its peak, with headline mortgage pricing falling over the last 12 weeks.  

“This is unlikely to stimulate an immediate dramatic bounce in activity and prices, but it does reduce the potential of a more pronounced reduction in prices as had previously been speculated by some commentators.” 

The ONS also published the UK’s private rental prices figures, which found the cost of rent for tenants in the UK increased by 5.7% in the 12 months to 2023 – an increase of 0.1% when compared to the 5.6% figure recorded in the 12 months to August. This represents the largest annual percentage change since January 2016.

Broken down by region, England saw annual private rental prices increase by 5.6%, in Wales it went up by 6.9% and it increased by six percent in Scotland. Within England, London saw the highest annual percentage change in private rental prices in the 12 months to September at 6.2% – with this being the highest annual rate change seen in the region since January 2006.  

The northeast, meanwhile, saw the lowest change in house prices – increasing by 4.7%.  

Responding to this, StepChange’s director of external affairs Richard Lane said: “Private renters can find little respite from financial pressures as rents continue to reach record highs across the UK.  

“Recent StepChange research found that tenants in the Private Rented Sector (PRS) are struggling to keep their heads above water when it comes to meeting financial commitments, with more than one in three (38%) using credit in order to afford rent, compared to one fifth (20%) of people with a mortgage. 

“Amidst a backdrop of staggeringly high rent prices in the PRS, tenants are afforded little statutory protection from eviction, particularly if they do fall into financial difficulty. We’re yet to see any progress on the long-awaited Renters (Reform) Bill which was introduced to parliament several months ago.

 
“We would urge the government to follow through on its commitment to reform the PRS, and as part of those reforms, go further in protecting the most financially vulnerable tenants, who consistently struggle to make ends meet as the price of renting privately becomes increasingly unaffordable.”