Annual house price growth slows but private rent increases accelerate

Sarah Coles, head of personal finance at AJ Bell, believes buyers are put off by the cost of property right now as annual house price growth slowed in July.

She said: “The property market eked out just 1.4 per cent of growth in the year to July. Uncertainty and instability have chased buyers away.

“The sky-high cost of property means anyone considering a purchase is taking a huge step financially, and clearly a significant number of buyers don’t have it in them right now.

“In London, this has long-since tipped over into price falls, so we saw the 11th consecutive month of annual drops.

“This month the South West also saw annual prices fall, so we will need to wait and see whether this is a blip or a worrying new trend. There’s always a risk that price falls start to affect buyer confidence elsewhere in the country, sales dry up, and we see price cuts elsewhere too.

“A sluggish market gives buyers time to take stock. It also gives them an opportunity to beef up their finances ready for a move. Buyers can build their savings war chest to cover the cost of the move, and their emergency savings for unexpected costs when they get into their new home.

“First-time buyers can work on their deposit and consider a Lifetime ISA to get a government bonus of up to £1,000 this year to supercharge their efforts.

“Rents rose slightly faster – up 3.8 per cent in the year to August, compared to 3.7 per cent a month earlier, and the pain for tenants is unlikely to be over just yet.

“Earlier this week, Zoopla forecast that rents would accelerate further during the remainder of the year, thanks to a shrinking number of properties to rent and a rising number of younger people priced out of the property market and renting for longer.

“Some landlords are hiking rents to cover their costs, particularly if they have been hit by higher mortgage rates, or having to make changes to meet rigorous new legislation. Others are reacting to the fact that rents can’t be accepted over the asking price now, so they are advertising properties at higher prices instead.

“And some are simply taking advantage of the fact that other landlords selling up means properties are thin on the ground, so they can still find a tenant if they ask for more.

“The higher that rents move, the more likely it is that young people will need help to get onto the property ladder.

“This could mean moving home for a period while they save for a deposit, asking parents for help with a lump sum, buying with a friend or family member to reduce the cost, or using the government bonus from a Lifetime ISA.

“If time is on your side, you can invest that money too, so your deposit has more opportunity to grow over the longer term.”