Headline news from Q2 2023

• UK rents increase at fastest pace for 7 years
• Number of mortgage approvals starts to rise
• Average UK house prices fall at their fastest rate in 12 years, while the North West continues to grow

 

The average annual rental price in the UK rose by 5% in May, representing the highest rate of increase in 7 years. Rent rises have been driven by a lack of housing stock, in addition to tax changes over the past few years which have hit landlords and led to many withdrawing from the buy-to-let market. Higher mortgage costs – with the average five-year fixed mortgage now above 6% – are also impacting potential homeowners, making it difficult for them to purchase and putting further demand on the rental sector.

                                                                       

                                                                          Annual % change in rent prices (UK average)

                                                                                                                                        Graph data from ONS

The number of loan approvals for house purchases rose 18% in the month to March, increasing from 44,100 in February to 52,000 in March. This is, however, still relatively subdued compared to the average of 62,700 per month in 2022, but is a sign that the sector is starting to recover following the slump at the end of 2022. This ‘bounce back’ in mortgage approvals reflected an increase in the stability and competitiveness within the mortgage market.

This has spurred the first average UK house price to rise in April (by 0.5%) after seven consecutive months of falling. This brought the average house price to £260,441, still 2.7% lower than a year ago.

                                                                       

                                                                             House mortgage approvals (thousands)

                                                                                                                     Graph data from Bank of England

While an increase in the number of mortgage approvals has been seen along with a rise in house prices in April, overall national prices have still fallen at their fastest rate in 12 years over the past year, as reported by Halifax. This is no doubt a result of household finances being squeezed as interest rates continue to rise, with the average two-year fixed rate mortgage reaching 6.54% at the end of the second quarter. The annual fall – equivalent to £7,500 off the average house price – was at 2.6%, representing the biggest drop since 2011. This is a stark contrast and rapid fall from the annual growth peak of 12.5% seen this time last year. This however, is in contrast to our main markets of Manchester and Liverpool, where property prices have been more resilient and continued to grow at an average of 8.6% over the same period.

                                                                                         UK Average House Prices

UK – Blue

North West – Orange

                                                                                                     Graph data from Halifax & Land Registry

 

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