House prices were down -0.8% in August, resulting in an annual fall of -5.3%, according to Nationwide. This bigger annual fall was to be expected, as we are exactly one year on from the house price peak in August 2022. The monthly fall was also substantial, the third largest of the last 12 months. But it took the average price back only to December 2021 levels, 20% up over five years.

Higher mortgage interest rates, which remain sensitive to emerging economic data, are weighing on buyer budgets. Many lenders cut their rates in August, however, indicating more confidence over the extent of future Bank of England base rate rises. Economic forecasters still expect this to peak at 5.5% in September, after only one more rise. 

Inflation remains the key concern but this continued to fall in line with expectations, down to 6.8% in July from 7.9% in June. Core inflation remained unexpectedly sticky at the same level in July as in June at 6.9%. There are growing signs of weakness in the employment data and forward indicators of GDP, which reduce the risk of further interest rate rises. But lenders will remain wary of surprises and the potential need for further action by the Bank of England.

The regional variation in price falls is becoming clearer in the more local Land Registry data. Brent had the biggest price falls over the year to May (-3.0%) followed by Hammersmith and Fulham (-2.0%). Areas which have remained more resilient tend to be lower priced urban markets in the north. 

Market activity remained subdued in July, with the number of completed sales slipping to -18% down on the 2017-19 average, according to HMRC , as the lower numbers of mortgage approvals at the start of the year fed into completion figures. Mortgage approvals have remained on average -23% below 2017-19 levels over the three months to July, so lower activity levels are set to continue. The number of sales agreed also remained -12% below the 2017-19 average in August.

The majority of surveyors reported both decreasing supply and decreasing demand in July, according to the RICS survey. The gap between supply and demand narrowed but persists. This will continue to suppress house prices and activity over the next few months. Any change is likely to be delayed until mortgage interest rates fall further, particularly in mortgage-reliant markets.

Annual rental growth across the UK continued to accelerate to 10.5% in July, up 0.2% compared to June, according to Zoopla. Rental growth accelerated across all regions except Scotland on a quarterly basis, as competition for limited stock remains high. On a local authority level only the Isle of Anglesey had rental falls (-0.5%) in the year to May.