The latest data on UK house prices highlight a market continuing to face a range of challenges, with affordability pressures, regional differences and changing buyer sentiment all influencing activity. While some areas continue to show resilience, others are experiencing greater pressure as economic uncertainty and borrowing costs shape decisions across the property sector.
With the wider mortgage landscape continuing to evolve, understanding how market conditions are affecting buyers, renters and property values remains a key focus for mortgage and property professionals.
Sarah Coles, head of personal finance at AJ Bell, shares her reaction to the latest figures
House prices held steady between April and May, but this masks a deep and dramatic North/South divide. Over the past 12 months, property prices in the North East have been roaring away – up 5.9%. The North West, meanwhile, is up 5.8% and Yorkshire and the Humber up 4.3%.
In the South West, they rose just 1.7%, in the South East they were up 1.2%, and in London, they fell a considerable 3.7%. It’s the ninth consecutive month that London has posted an annual price drop. The bulk of the damage was done in inner London, where prices are down 5.9% in a year.
Affordability plays an enormous part in this. London still has the highest house prices in the country, at an average of £545,000, which is why it also has the largest proportion of renters.
Vast swathes of Londoners have been priced out altogether, while others aren’t keen to stretch their finances at a time when there’s so much uncertainty in the wider world. Meanwhile, the North East has the lowest average price, at £164,000, and while average salaries are also lower, the gulf remains striking.
As prices fall in London, it affects sentiment, so some would-be buyers in the capital are holding off for fear that after they buy, their new home could keep losing value. It becomes a self-fulfilling prophecy because having fewer buyers around tends to depress property prices even further.
Looking ahead
We can expect more weakness to settle into the figures across the country in the coming months. This data measures house prices at completion, so tends to cover sales agreed three or four months earlier. It means the summer figures could be a tough read, reflecting loss of confidence and stretched affordability after the start of the Iran war.
There was an outbreak of optimism with the Iran peace deal, which cut the oil price, reduced inflation fears, and meant mortgage rates got decidedly cheaper. However, the fragility of that deal has dimmed this optimism, and recent mortgage rate rises could send many buyers back into a wait-and-see pattern.
It can be frustrating to put your buying plans on hold, but it doesn’t mean you can’t make progress in your plans. It’s an opportunity to keep building your deposit.
If you have a Lifetime ISA, you can also make the most of this year’s allowance and the government bonus. It’s also a chance to revisit your emergency savings.
These always take a hit in the early months of home ownership, as properties tend to hold nasty and expensive surprises, so you could be very grateful for anything you can do to beef up your savings now.
Steady rent rises
Rents were up 3.3% in the year to June – the same pace as a month earlier. It’s a far cry from runaway rents of recent years, and with average wage rises (excluding bonuses) of 3.4%, at first glance it appears that life is getting easier for tenants.
However, it’s more complicated than that. The North/South divide is making its presence felt in the rental market, with tenants in the North East wrestling with 6.3% rises over the year, the North West with 5.4% and Yorkshire and the Humber 4.8%. All of these are racing well ahead of wages, making rents tougher to cover.
Meanwhile, although pricier parts of the south saw rents rise more slowly, including the East of England at 3.3%, the South East at 2.3% and London at 2.2%, the rents in those areas are horribly expensive. In the UK, monthly rents averaged £1,388, while in London they cost an eye-watering £2,302 a month.
It means the pain may not be over for renters, which is why so many are keen to get onto the property ladder. If you’re struggling to build a deposit, it’s worth getting all the help you can, whether that’s from the Bank of Mum and Dad or the government bonus from a Lifetime ISA.
If time is on your side, it could be worth considering investing that money into the stock market, so your money is working as hard as possible for you.
