UK annual house price inflation slowed again in May for the seventh consecutive month, the latest figures revealed.
UK house prices ticked up 1.9% in the year to May, down from 3.2% in the 12 months to April, the Office for National Statistics (ONS) said.
While the average UK house price remains higher than 12 months ago, prices are now £7,000 below the recent peak in September 2022, with the average price of a house in the UK stood at £285,861, government figures showed.
Meanwhile. private rents rose faster last month than they have since records began in January 2016.
Across the UK, rents grew 5.1%, with higher percentage rises recorded in Wales and Scotland, according to the ONS.
Iain McKenzie, CEO of The Guild of Property Professionals, said: “The outlook for the property market continues to be a mixed bag, as house prices remain relatively steady even while overall growth is slowing down.
“Last year’s ‘Mini Budget’ heralded the start of this downward trend but make no mistake and think that this is a spiralling housing market, as prices are still higher than this time last year and massively above pre-pandemic levels. Homeowners can rest assured that their property has not lost significant value this year.
“The good news for buyers and sellers is that inflation is finally easing off, and has fallen to the lowest level in more than a year.
“This means that the chances of another interest rate rise coming are less likely, which will hopefully go some way towards making the mortgage market more competitive again.
“Affordability has been the biggest barrier to home ownership in recent times, inflating house prices beyond what people can afford and stopping prospective buyers from saving for a deposit.
“We expect this cooling trend to continue throughout the rest of the year, albeit at a much slower pace than the gloomy forecasts we were seeing at the start of 2023.”
Jason Tebb, CEO of OnTheMarket, commented: “These numbers are a little historic but show the continued, gentle slowdown in annual price growth in May, with the average property price still £6,000 higher than a year ago.
“The housing market continues to show remarkable resilience considering the economic uncertainty. News that inflation is not only moving in the right direction but at a faster pace than expected will provide some reassurance.
“After so many interest rate rises, affordability is a challenge for many buyers relying on mortgages so sellers keen to get a deal done in a timely fashion must price carefully.”
Jonathan Hopper, CEO of Garrington Property Finders, said: “The oil tanker is turning but only slowly, and the price falls seen in 2023 haven’t yet cancelled out the momentum built up at this time last year.
“In July 2022, annual house price inflation peaked at 14.1%, seven times faster than the meagre 1.9% recorded this May. With sellers now repricing across the board, the direction of travel is clear and it’s only a matter of time before the official statistics catch up.
“On the front line we’re seeing buyers adjust their budgets as rapidly rising interest rates force them to recalculate what they can afford. While this is prompting some discretionary sellers to pause their selling plans, a clear pattern is emerging among movers who need to sell.
“Most are opting to swallow the bitter medicine of a price cut early, rather than asking an optimistically high price only to have their home sit on the shelf unsold and then be forced into a bigger price reduction later.
“However they’re then seeking to soften the blow by negotiating very aggressively on the price they pay for the home they’re buying.
“This is creating a cycle of gradually falling prices and thus strong buying opportunities for strategic buyers who are willing to focus on longer-term value rather than just what might happen in the coming months.
“While further softening of prices is likely, two factors could make it more gentle than previously thought – the supply of homes for sale is shrinking and today’s sharper than expected fall in consumer inflation might prompt the Bank of England to pause interest rate rises.”
Nick Leeming, Chairman of Jackson-Stops, commented: “After an unexpected uptick last month, house prices once again reflect the swing back to a buyers’ market. All the same, we mustn’t overlook that house prices remain on a par with a year ago, having risen £6,000 annually, demonstrating just how significant prices have risen in the past three years.
“Across the Jackson-Stops network, clear differences are emerging in local markets. In the South West, on the East Coast and in some of the Home Counties, demand from buyers is even higher now than a year ago, bucking wider market trends and showing resilience that defies predictions.
“Cash remains king in the current climate, while mortgage rates continuing to fluctuate and weigh heavy on guide prices across the board for downsizers, who make up a huge proportion of sellers in the prime market.
“There is no shortage of people trying to buy houses; on the contrary, buyers still remain committed for the right property, and we are seeing consistent interest for houses that tick all the boxes.
“That ideal home in the perfect school catchment area or with undisturbed views will always be met with fascination and desire from prospective buyers.
“At the same time, buyers who don’t need to move right now are searching at a more leisurely pace, and are holding out for a lower price than they might have done a year ago, especially for properties where trade-offs are involved.
“There needs to be a meeting of minds between sellers and buyers when it comes to pricing. We’re clear with buyers when conducting valuations that over-enthusiastic asking prices could make negotiations unavoidable further down the line.”
Nicky Stevenson, MD at Fine and Country, said: “House prices continued to rise in May compared to a year ago, although mortgage rate rises are stifling growth as it eats into what buyers can afford.
“Today’s larger-than-expected fall in inflation will spark hopes that the Bank of England will be less inclined to hike rates further, and that there will be more stability in the mortgage market as a result.
“The housing market has been incredibly resilient despite the economic pressures, and prices remain £6,000 higher than 12 months ago.
“Despite many home-movers having reduced buying power compared to the start of the year, demand remains broadly similar to 2019, which was a fairly typical year for the housing market.
“Sensibly priced properties are still attracting a lot of interest and offers, particularly from buyers who sense they could be getting a good deal on their next home.”
Nigel Bishop, founder of Recoco Property Search, said: “With spring and summer marking the busiest season for the property market, we have seen continuous demand from house hunters throughout May. Despite some economic challenges, such as the recent hike in interest rates, buyers remained motivated to find a property as soon as possible.
“With a high number of professionals still working from home or splitting their time between home and the office, buyers have been prioritising properties that contribute to a work-life balance. Larger homes with private gardens and properties in proximity to parks and other lifestyle amenities as well as easy access to London have been particularly sought-after.”
Chris Druce, senior research analyst at Knight Frank, commented: “With average borrowing costs now above the level seen after a spike after last September’s poorly received mini-Budget sentiment has weakened and UK house price growth continues to moderate. The CPI inflation data, which showed a fall from 8.7% to 7.9%, suggests that we’re on course to reach peak rates sooner rather than later. However, we’re not there yet.
“Until we are the associated uncertainty will make it hard for buyers to plan and lead to further hesitation in the market, keeping downwards pressure on prices. We expect house prices to fall by 10% over this year and next, although strong wage growth, low unemployment and the forbearance of lenders will make steeper falls than this unlikely.”
With regards to the rental market, he added: “Demand continues to outstrip supply in the rental market, which has driven the increase in annual rental prices to a series high. There is little to suggest this will abate.”
Nathan Emerson, Propertymark CEO, said: “Despite disappointing national economic news, it is clear that a core portion of the country are still looking to get moving and are not put off by current conditions.
“As sale prices drop, sellers are finding a middle ground with affordability, yet sellers are still making a gain, meaning the wheels of the market keep turning for all.”
On the Index of Private Housing Rental Prices, Emerson added: “Our members continue to tell us of the huge disparity in the number of properties available to rent and the growing number of renters looking for a home, ultimately continuing to put pressure on rent prices.
“UK governments need to stop tinkering around the edges of the problem and look to adequately incentivise the provision of desperately needed homes in the private rented sector.”
Malcolm Webb, technical director at Legal & General Surveying Services, commented: “It may seem that the UK housing market has entered a turning point. However, considering the full context of these price variations is important.
“UK house prices have enjoyed decades of growth, reaching all-time highs during the immediate post-pandemic period. As such, any drop in house prices seen today should be considered something more of a levelling out in asking prices.
“The reality is that there’s still a sizeable discrepancy between available housing supply and market demand, keeping upwards pressure on prices – especially in certain areas of the UK. Nevertheless, we should remember that house prices can vary significantly by region, so homeowners should always seek advice from a local expert to scope out their available options.
“While the cost-of-living crisis and high house prices have created ongoing affordability challenges for would-be buyers, there are still good options available, with some prospective buyers shifting their attention to smaller homes instead.
“For would-be borrowers in this position, getting a home survey is key to making a well-informed decision. Should a surveyor report any defects that could require expensive repairs, buyers can use the report as a renegotiation tool and ensure they really are getting a fair asking price.”