The average UK house price increased by 5.5% in the 12 months to February 2023, slowing from 6.5% in January 2023, the latest figures show.

The typical price of a home in February was £288,000, which is £16,000 higher than 12 months earlier but £5,000 below a recent peak in November 2022, according to the Office for National Statistics (ONS).

Annual residential property price growth in February 2023 was less than half the rate seen in July last year, when it was running at 14.4%.

On a month-on-month basis, the ONS said average property prices dropped in February this year for the third consecutive month.

On a seasonally adjusted basis, the average UK house price decreased by 0.3% in February 2023.

Average house prices increased over the 12 months to £308,000 (a 6.0% annual increase) in England, £215,000 in Wales (6.4%), £180,000 in Scotland (1.0%) and £175,000 in Northern Ireland (10.2%).

Within England, the West Midlands recorded the highest annual percentage increase in house prices in February, at 8.6%, while London recorded the lowest increase, at 2.9%.

London’s average house prices remain the most expensive of any region in the UK, with an average price of £532,000 in February 2023.

Industry reactions:

Matthew Thompson of Chestertons said: “Whilst buyers remained undeterred in February, there were fewer sellers entering the market. Our branches registered a mere 2% increase in the number of properties being put up for sale compared to February 2022. London continues to experience a chronic undersupply of suitable housing; particularly as demand has remained strong since the start of 2023. The number of offers being withdrawn has also decreased by 11% which indicates that there are fewer window shoppers and more serious buyers entering the market.”

Carl Howard, Group CEO of Andrews commented: “Renters are needing deeper pockets and sharper elbows as rocketing demand continues to outweigh the availability of homes to let.

“Another record rise in annual rental price growth reflects the frenzied market, which is showing no signs of letting up as the number of buy-to-let landlords dwindles.

“Rate hikes and red tape have combined to push some landlords towards the exit door as investment properties feel more trouble than they’re worth. Many older buy-to-letters nearing retirement are deciding to cash in these nest eggs, and they’re not being replaced.

“Landlords who continue to operate do so in the face of increased costs, squeezed margins and growing regulatory scrutiny. Meanwhile house sales continue to fall, putting more pressure on the rental sector.

“It has become harder for first-time buyers to scrape together a deposit to buy their own home – with inflation still in double figures – and accidental landlords, often couples with an extra property, are needing to sell to firm up their finances or fund their next move.

“To ease the pressure on tenants, more needs to be done to attract buy-to-let landlords into the market. If not, we’re likely to see rental prices continue to rise over the coming months.”

Nick Leeming, chairman of Jackson-Stops, said: “The property market has turned into a marathon from a sprint. While there is still a long way to go, the market has cleared the first jump relatively unscathed. The figures show a soft repricing, which marks a more stable period for house price values following the supersonic heights reached this time last year.

“Even in the last two months, the economic picture is becoming much more stable. Mortgage deals are also returning to the market after a short hiatus in the immediate aftermath of Trussenomics.

“Market conditions and an under reliance on outside funding has left cash buyers in a fortunate position, able to push ahead with quick completions and benefit from the increasing number of properties entering the market.

“Across the Jackson-Stops national network, we are seeing strong demand from buyers in commuter markets such as Midhurst, Tunbridge Wells, Reigate, and Chelmsford, with prospective buyers outweighing new instructions by at least 40%.

“With rents soaring ever higher, getting on the property ladder remains a priority for first-time buyers, keeping all tiers of the market moving where supply is strong.

“Those that have recently sold their homes and have been able to capitalise on the exponential rise in property values may now find themselves in a position to buy their next home mortgage free, and not having to compromise on size or specification. Boomers will be the driving momentum in the housing market for the remainder of 2023.”

Tom Bill, head of UK residential research at estate agent Knight Frank, said: “We expect prices to fall by a few per cent this year as more financial pain enters the system but the landing will be comparatively soft thanks to a strong jobs market, savings accumulated during the pandemic, record-high levels of housing equity and the large proportion of people who move because they need to.”

Nicky Stevenson, MD at Fine & Country, commented: “Inflation is proving more tenacious than expected, but it is still widely expected to fall sharply later this year.”

“Sellers are much more open to negotiate, particularly if they have interest from chain-free first-time buyers.”

Frances McDonald, director of residential research at Savills, said: “The ONS index highlights that annual house price growth across the mainstream UK housing markets continued to slow in February. On a regional basis, lower value markets that are less constrained by affordability, such as the West Midlands and the North East, were the top performers whilst London recorded lower levels of annual price growth.

“Inflation data also released today suggests that whilst CPI inflation fell in March, it still remains high at 10.1%. This means there remains the possibility of another Bank base rate rise in May’s MPC meeting which could limit buyers’ budgets further.

“The prime markets, which are less exposed to interest rate rises, continued to outperform with prices falling by a marginal -1.0% during the first quarter across the regional markets and remaining flat in London. This is a trend that is expected to continue to play out over the remainder of the year, with cash buyers taking a larger market share.

Iain McKenzie, CEO of The Guild of Property Professionals, remarked: “The gradual readjustment in house prices continues, albeit at a slower pace than analysts feared towards the end of the last year.

“A third consecutive month of falling house prices may make homeowners anxious, but the market was always likely to soften following the unprecedented growth we have seen over the last few years.

“If you are considering selling your home, you may find that now is the best time to contact your local estate agent, as they will be able to tell you how prices could fluctuate in your area.

“Prospective buyers are still up against inflation levels above 10%, but the good news is that this is expected to fall sharply soon.

“Rocketing rental costs mean that first-time buyers are still better off buying if they can. With mortgage providers offering better rates than they were a few months ago, we anticipate sales to hold steady in the months to come.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “The fall in inflation is welcome and means it is increasingly likely that (the Bank of England) base rate is near its peak.

“Despite the continued high cost of living, green shoots and resilience in the housing market are evident. Lenders expect tightening credit lines over the next three to six months but no credit crunch.

“Pricing on new mortgages continues to trend downwards, providing welcome relief for borrowers, although the rate of falls is slowing.”