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    The Current House Price Growth Rate

    Following the annual house price growth slowing to +0.6% last month, the property market continues to adjust to high mortgage rates. These rates have increased mortgage repayments in the UK by an average of £216 per month. This is a 23% growth.

    In the last four weeks, demand, sales, and availability have dropped. Compared to the same period between 2018 and 2022, demand is 34% lower and sales agreed are down by 20%. Due to mortgage rates increasing, a combination of weaker demand, price-sensitive buyers, and fewer sales this year, house price growth has slowed down. Currently, the overall annual house price growth sits at 0.1%, which is the lowest it has been for 12 years.

    The North-South Divide

    The South of England has been registering larger price drops than the North. With the South seeing property price reductions of up to -1% and Scotland leading house price growth with 1.7%, the North-South divide has never been clearer.

    The lower the demand in pricier areas, the higher the pressure on house price growth. In the South, buyers need larger mortgages, bigger deposits, and higher incomes to secure a property. Due to this, the likes of London are seeing house prices drop to accommodate. But renting remains cheaper than buying.

    North of the Midlands, house price growth is low. However, levels of activity in the Northen market are keeping strong. In the North East, mortgage repayments are up to 18% lower than the region’s rental costs, which in turn supports increasing demand plus first-time buyers’ access to the property market. This is predicted to continue for the rest of 2023 and into 2024.

    Where buying is more affordable than renting:


    Region Avg. Rent Avg. Mortgage Repayments  
    Scotland £748 £620
    North-West £795 £736
    North-East £649 £531
    Yorkshire & Humber £758 £731

    *Report from Zoopla

    Where renting is more affordable than buying:


    Region   Avg. Rent Avg. Mortgage Repayments  
    West Midlands £852 £890
    East Midlands £816 £868
    South West £1,016 £1,184
    South East £1,254 £1,469
    London £2,053 £2,546

    The Impact on First-Time Buyers

    Varying house price growth can partially be explained by first-time buyers (FTBs) facing higher mortgage rates. FTBs account for 1 in 3 property sales each year. The majority of FTBs originate from the private rental market, having moved over to homeowner status during the lower mortgage rates of recent years. Mortgage repayments on these lower rates meant that buying was far more affordable than renting. Due to this, the FTB demand was met. Many buyers took advantage of lower mortgage rates and bypassed the market of smaller homes, instead buying three-bed properties.

    The increasing interest rates this summer, though, have reversed this trend. Even with growing rental prices, renting is now 10% cheaper than buying due to rates exceeding 5%. House price growth is consequently slowing to accommodate a large buyer section of the market.

    However, the FTB experience varies across the country. Even with the house price growth rate slowing or property prices dropping in the South and even the Midlands, buying a home remains more expensive than renting. London alone sees average mortgage repayments 24% higher than monthly rent in the same area. The higher mortgage rates are pricing first-time buyers out of the South’s property market. First-time buyers are still encouraged to look North, where buying remains more affordable than renting.

    CityRise Verdict

    So, is now a good time to buy a house in the UK? Having guidance through property investment could not be more necessary to understand the best options. While there has been a shift in market appetite, activity remains strong and on par with last year’s levels. Even with higher interest rates and affordability concerns, the sector remains as resilient as ever. Reports reveal that those looking to buy are determined to quickly secure their property.

    The slowdown of house price growth has allowed the available supply to see an annual hike of 37% – the highest level for the year. This is a much-needed boost to the housing stock, which will ease pressure on the market and offer buyers more choice. Housing affordability is on the rise, too, as average earnings increase and property prices reduce. It looks to improve by 9-10% over the remainder of the year.

    Compared to July 2022, the number of prospective tenants has risen by 38%. Rental demand is ever-present and ever-growing. With supply catching up, too, the prospect of beating the competition and benefiting from the high rental demand is clear, with returns set to improve as house price growth steadies and rises once more.

    In the current climate, investing in a BMV property may be a better option if buyers are cautious. Investors can secure a buy-to-let property far below its market value – which, with house price growth slowing, could be a great way to benefit.

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