Receive free updates on UK house prices
We will send you a myFT Daily Summary email summarizing the latest UK property prices news every morning.
UK rental prices hit their highest level on record while house price growth waned as rising mortgage rates hit the housing market, official statistics showed on Wednesday.
Private rents paid by tenants rose 5.1% in the 12 months to June, the largest annual percentage change since the start of the data series in January 2016, according to published figures by the Office for National Statistics.
The annual percentage change in private rental prices in London was 5.3% in the 12 months to June, above the English average and its highest annual rate since September 2012.
Housing market analyst Neal Hudson said the spike in rental prices was not unique to the UK. A post-pandemic rebound in demand, combined with rising interest rates pushing up homeowners’ mortgage costs, has led to similar price increases in the United States, Canada and Ireland.
But in the UK, Hudson said, the situation had been exacerbated by the move to longer rentals, which had reduced turnover, and by landlords selling or switching to temporary rentals, reducing an already supply. rare rental properties. “I wondered if it was a temporary problem, but it lasts longer,” he said.
Recent surveys have shown that rental demand is strengthening as higher mortgage rates leave fewer people able to afford property.
ONS data showed average UK house prices fell by 0.4%, on a seasonally adjusted basis, between April and May. This brought the annual rate of increase down to 1.9% from a revised 3.2% the previous month.
The slowest growth over the past year has been in London, where prices are highest and buyers most indebted.
“House prices were already falling before the new mortgage rate hike,” said Gabriella Dickens, an economist at consultancy Pantheon Macroeconomics, adding that more timely surveys suggested the fall in prices would become more pronounced in the coming months. come.
House prices have so far proved more resilient than many economists had expected in the face of rising interest rates, although the number of transactions has fallen sharply.
Dickens noted that the May drop still left average prices “huge” 24.6% above their average level in 2019.
Hudson said many people seemed to be content with smaller properties, while taking on longer-term mortgages and payments that would eat up more of their income.
This has resulted in “an even worse version of the already failing housing market we had last year” – with new buyers reaching out for “a house that is probably smaller, more remote and less suitable”.