UK HOUSE prices fell for the first time in more than a decade in September, according to the Office for National Statistics (ONS), as higher mortgage rates weighed on activity.

Average prices slipped 0.1 per cent year on year to £291,000 (S$489,046), with Wales bearing the brunt of the declines. While this was the first fall in home values on the ONS’s measure since April 2012, it was less severe than the than the 0.7 per cent drop expected by economists. August’s growth figure was also revised up, to 0.8 per cent from 0.2 per cent, indicating the housing market has remained stronger than many have expected.

The figures on Wednesday (Nov 15) bring the ONS’s data more in line with that from mortgage lenders Halifax and Nationwide Building Society, which have been showing declines in house prices for some time. Property portal Rightmove, which measures sellers’ asking prices, has also been pointing to falls for the last several months.

Pressure on property valuations has not been as bad as expected so far, however. After the Bank of England tightened monetary policy with a string of 14 consecutive rate hikes, economists were predicting falls of around 10 per cent. On Halifax and Nationwide’s measures, which are slightly more forward-looking than the ONS which uses Land Registry data on completed sales, the declines have only hit around half that amount.

Stephen Perkins, managing director at Yellow Brick Mortgages, said the fall in September was “no surprise” given the headwinds facing the market earlier in the year, when the BOE was still hiking rates and inflation was uncomfortably high.

“Remember that this data is showing completed prices on sales agreed a number of months before September,” he said. “With the economy looking to have turned a corner following Wednesday’s better-than-expected inflation data, and mortgage rates improving by the day, this may be the best time to buy before further house price increases.”

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

Sign Up

In England, prices were down 0.5 per cent. Wales saw a decrease of 2.7 per cent, while Scotland and Northern Ireland saw increases of 2.5 per cent and 2.1 per cent respectively.

The North East saw the largest gains in England, with prices rising 1.6 per cent year-on-year, while prices in the South West dropped by 1.6 per cent. In London, the average property fell by 1.1 per cent.

While house prices may now be declining, the average price of a property in the UK is still around £60,000 above where it was pre-pandemic. Falls in the market have been constrained by a lack of supply, as house-building has been slow and strength in the labour market has prevented forced sales.

The lack of supply is being felt just as acutely in the rental market, where the amount of money demanded from tenants has been soaring.

In October, according to the ONS, rental prices rose by 6.1 per cent year-on-year – a new record since data began in 2016. The acceleration from growth of 5.7 per cent in September was also the largest on ONS records.

An influx of students post-pandemic, along with renters moving back to cities and landlords selling properties due to rising mortgage rates and tighter regulation, have all led to a squeeze on the market.

“Government interventions, onerous regulations and a serious lack of supply of suitable properties for rent mean that rapid increases in average rents will continue,” said Ross McMillan, owner of Blue Fish Mortgage Solutions. BLOOMBERG