PwC comments on latest ONS house price figures

Commenting on the latest ONS house price data, Barret Kupelian, senior economist at PwC UK, says:

“The latest data release from the ONS shows that UK house prices contracted by around 1.1% in January this year, dragging down the annual growth rate to 6.3%. More timely estimates from lenders show that this trend will continue for the next few months.  

“The housing market continues to adjust to significantly tighter financial conditions compared to a year ago. Survey data shows that prices will likely fall throughout the summer, after which we could see prices start to stabilise before growing again. Post-summer, the housing market should also be supported by real earnings growth turning positive towards the end of the year. 

“However, the less reported news is the plight of renters, who are also experiencing rental inflation to the tune of 4.7% in February. Higher interest rates have reduced the financial attractiveness of buy-to-let mortgages, leading to excess demand in the rental sector. This means that first time buyers will continue to experience a double-whammy effect of rents going up at record rates and real earnings contracting due to high inflation, which rose to 10.4% in the year to February. This combination means that renters may have to put their aspirations of owning a property on hold.”