Average UK house prices increased by just 0.9% in the year to August as the housing market continued to lose price momentum according to the latest official figures.

The UK House Price Index puts the average property value at £273,000, around £2,000 higher than a year earlier.

Annual growth slowed from a revised 1.2% in July and has now fallen for four consecutive months, with weaker growth recorded across six of England’s nine regions.

Prices increased by 0.3% between July and August on a non-seasonally adjusted basis. However, after seasonal adjustment they fell by 0.2% month-on-month.

LONDON FLATS FALL 5%

The North East recorded the strongest annual increase among English regions at 3.2%, although that was down from 4.7% in July.

London remained the weakest region, with average prices falling 2.2% over the year to £554,430.

The capital’s performance was heavily influenced by flats, where average prices dropped 5% year-on-year. Houses in London increased in value over the same period.

Flats account for around half of property sales in London compared with approximately one-fifth across Great Britain, according to the index.

The South East was the only other English region recording an annual decline, with prices down 0.8%, while prices in the South West were unchanged.

FLATS UNDERPERFORM

The weakness in flats extends beyond London.

Across the UK, the average flat or maisonette was valued at £194,148 in August, down 1.6% from a year earlier.

By comparison, semi-detached prices increased 2.1% to £278,675, terraced homes rose 1.8% to £232,505 and detached properties increased 0.7% to £443,846.

Across the nations, annual prices increased 3.1% in Wales, 2.9% in Scotland and just 0.4% in England.

The latest Northern Ireland figure, which relates to the second quarter, shows annual growth of 9.2%.

AFFORDABILITY SQUEEZE

Tomer Aboody, founding director of specialist lender MT Finance, said: “Affordability is key when buying a home, and the current climate – both micro and macro – is creating uncertainty, while inflation is on the rise.

“Mortgage rates are increasing, which in turn is reducing market activity, as well as prices agreed. Buyers are very aware of what they can afford, and in turn, are making lower bids.

“Given this backdrop, it is no surprise that we are seeing little growth in the property market, which is so vital to the overall health of the UK economy.

“With little encouragement from a tax-hungry government, buyers and sellers alike are lacking confidence.

“That said, we are still seeing growth overall, while the reduction in values in some parts of the country is mainly due to a much higher starting point.”

‘PICTURE IS DARKENING’

Karen Noye, mortgage expert at Quilter, added: “The housing market is beginning to feel the squeeze from an increasingly difficult economic backdrop.

“UK house prices were up just 0.9% in the year to August, while transactions were 1.9% lower than a year earlier. London and the South East were already recording annual price falls.

“These figures also tell us where the market was during the summer rather than where it is today. The UK House Price Index is based on completed transactions and a purchase will typically take six to eight weeks to reach completion, so there is a significant lag built into the data. As we move towards winter, the picture facing prospective buyers is darkening.”