House prices rise by 0.5% over the last month amidst chronic lack of supply

According to today’s House Price Index by the Office of National Statistics, UK average house prices have risen 0.5% from last month on a non-seasonally adjusted basis from June 2023. The average UK house price is £300,000 in July 2023, £2,000 above July 2022 but £2,000 below the peak in November 2022. However, since April 2023, house prices have risen £6,000. 

Stacy Eden, national head of real estate and partner at leading audit, tax and consulting firm RSM UK, comments: ‘Property prices are broadly flat with the cost-of-living crisis and significant rises in interest rates putting downward pressure on prices but the chronic shortage of supply is counteracting that. Looking ahead, we would expect house prices to be relatively stable, having fallen 5% until April 2023 from their peak in November 2022, which is quite significant given the high levels of inflation. But, it should be noted that house prices are still 20% higher than they were at the start of pandemic.’

He added: ‘First-time buyers are really feeling the squeeze. The house price to earnings ratio is still at an unsustainable level which is making property unaffordable particularly with high rises in interest rates and of course very significant rental growth which is impacting first-time buyers saving for a deposit. This is a concern as house price transactions are 17% lower than July 2022 and the RICS survey for August shows a monthly decline in enquiries to purchase properties. 

‘As the government looks for supply side reforms to revitalise the UK economy, resolving the supply and demand equation through planning reforms seems to be an obvious place to start.  However, the government seems to be unable to deal with the chronic lack of houses as seen by the scrapping of local targets. One solution could be the reformation of SDLT to potentially encourage more liquidity in the market.’