Record UK Rent Surge, Slower House Price Growth

According to data reported by the Financial Times, residential rents in the UK marked a historic surge last month, while there was a slowdown in house price growth during June.

Tenant payments exhibited a noteworthy 5.3 percent increase in the 12 months leading up to July, representing the most substantial annual percentage shift since the initiation of data collection by the Office for National Statistics in January 2016.

Meanwhile, the same source indicated that house price growth demonstrated a deceleration, with an increase of 1.7 percent over the year to June. This figure was a decrease from the 1.8 percent rise observed in May, considerably lagging behind the peak of 14 percent reached in July of the previous year. Furthermore, it stands as the lowest growth rate since June 2020, a period when the property market was severely affected by the initial Covid-19 lockdown.

The article highlights the contrasting dynamics, which appear to be influenced by increased mortgage rates impacting both the rental and property sectors, compounded by regulatory factors pressuring landlords to divest their properties.

These trends also reflect a growing preference for renting over buying, driven by the increasing cost of ownership. In the city of London, these patterns are more pronounced, with a 5.5 percent rise in rents observed in July—an all-time high rate since data collection for the capital began in January 2006.

Largest rent increases felt by London tenants while property values decline in the capital.

In contrast, house prices in the capital declined by 0.6 percent in June compared to the same period last year, the only region to register a decrease. This marks the initial annual contraction in London since November 2019, contrasting with a 4.7 percent expansion in the north-east region of the country, which held the position of the best-performing area.

Amid these shifts, experts are pointing out that long-standing affordability constraints have led to London's continued underperformance, although the gap between the capital and the rest of the country has somewhat narrowed.

Several economists anticipate the trajectory of declining house prices to persist, given the expectation of enduringly elevated mortgage rates. An economist from Pantheon Macroeconomics forecasts an 8 percent price decline from their September peak, highlighting that although reduced expenses and robust wage growth might allocate some funds to housing costs, household caution remains significant, and the anticipation of further house price drops is deeply ingrained.

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