Annual price growth hits new low

House price growth fell to its lowest annual rate since 2012 in August, official data shows.

The latest Land Registry House Price Index shows average annual property value growth slowed from 0.7% in July to 0.2% in August and dropped from 0.8% to 0.3% on a monthly basis to £291,044.

It is the lowest annual figure since a 0.22% drop in prices during April 2012.

Commenting on the data, Sarah Coles, head of personal finance at Hargreaves Lansdown, highlights that last year’s mini-Budget will skew the next few month’s annual figures so said it is important to focus on the monthly data.

She said: “Since March, house prices have continued to rise on a monthly basis, but have slowed between July and August. Given the fact that the Bank of England figures show fewer mortgages approved during the month, RICS shows buyer demand falling and HMRC recorded fewer transactions, we could see this slow further and prices start to plateau again, or even drop.”

Charlotte Nixon, mortgage expert at Quilter, highlighted that the Land Registry house price data tends to “massively lag the real world events” happening today.

She said: “The market is very subdued at the moment and this lack of demand is causing sellers to drop prices in a bid to attract those who might be adopting a wait and see approach.

“There are some positive movements though. Rightmove data also released today, shows that the average 5-year fixed mortgage rate is now 5.42%, down from 6.08% a year ago and the average 2-year fixed mortgage rate is now 5.88%, down from 6.32% a year ago. Falling rates will help people feel more secure in their search for a home without the threat of a rug being pulled out from under them by rates skyrocketing.

“However, it is likely that we are going to see prices stall and fall throughout the country in the coming months. Interest rates are probably going to stay higher for longer than originally anticipated but those who can afford to move despite elevated rates will eventually decide to take action especially if they are renting and their re-entry into the market will hopefully provide some buoyancy in the spring of 2024.”

Agents were, perhaps unsurprisingly, more positive.

Guy Gittins, chief executive of Foxtons, said that with higher interest rates largely priced in, sellers are having to be more competitive with their property pricing to stimulate buyer demand.

He said: “This puts buyers in the driving seat when it comes to negotiations, but sellers that adjust their pricing accordingly are successfully transacting. At Foxtons, we’ve seen a higher volume of new sales agreed as a result.”

Nick Leeming, chairman of Jackson-Stops, added: “The continued resilience of the UK housing market should not be underestimated. While house price growth may have subdued – perhaps the expected outcome in response to more challenging lending conditions – the market is taking a ‘Keep Calm and Carry on’ approach to housing.”

He said new instructions are rising across the network and are up 72% since January, adding: “Irrespective of short term uncertainty and economic headwinds, the fundamentals of the property remain the same. Buying a home or taking out a mortgage are some of the most significant and long-term financial decisions a person will make, and while there are always periods that are more favourable financially, changes to lifestyle will inevitably continue to contribute to transactions completing.

“More broadly, homeowners have been paying close attention to the recent party conferences, hoping to compare the major parties housing policies ahead of the next general election, which could be as soon as next spring.

“Whilst the run up to an election year can breed more uncertainty, we are yet to see this in a big way. If positioned correctly, it is hoped that any new housing policies serve to stimulate markets and broader economic confidence, supporting transactions and housing mobility across the UK.”