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UK property market defies economic gloom as average house price rises to £296,000

Houses in Glastonbury, UK
UK house price growth slowed in August but it was still higher than a year earlier. Photo: Matt Cardy/Getty

UK house prices slowed in August but growth remained in double-digit levels as the property market remains resilient to inflationary pressure and turmoil in the wider UK economy.

Fresh figures from the Office for National Statistics (ONS) on Wednesday show property prices increased by 13.6% year-on-year in August.

That was down from 16% in July, which reflected how prices in the same month last year were hit by the end of a tax break for home-buyers.

The average cost of a home stood at £296,000 in August, which is £36,000 higher than in the year before.

Read more: Stamp duty cut survives Hunt's axe as mini-budget is scrapped

James Forrester, managing director of Barrows and Forrester, said: "While the UK government may be a laughing stock, the UK property market is far from it and continues to move forward at pace despite the chaos that has unfolded across the wider economy.

"A commitment to cutting stamp duty will certainly act as the cherry on the cake for many homebuyers, but it’s their continued ability to borrow in order to buy that will keep the cogs of the property market turning.

"As it stands, they remain more than able, with the majority of lenders still offering a great level of products at what remain favourable rates. With stability now returning to the gilt markets, we can expect the mortgage sector to level out after what has been a rough few weeks and this will ensure the market remains in good health over the coming months."

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Average house prices increased over the year to £316,000 (14.3% annual growth) in England, to £220,000 in Wales (14.6%), to £195,000 in Scotland (9.7%) and to £169,000 in Northern Ireland (9.6%), according to the ONS.

London registered the lowest annual house price growth, where average prices increased by 8.3% over the year to August, down from 10.1% in the month prior.

But the capital remains the most expensive region to buy a home, with a record average price of £553,000 during the month.

Prices grew at the fastest rate in the south west of England at 17%, down from a growth rate of 21.1% in July 2022.

"House prices increased slightly on the month, with the fall in the annual rate of growth due to the large price rises seen at this time last year at the end of the stamp duty holiday," Matt Corder, deputy director of the prices division at the ONS said.

Meanwhile, rental price growth continued to increase, driven by London, Corded added. Although let rates were still "showing relatively low growth", it was the strongest increase in six years.

Rents climbed to 3.6% in the 12 months to September, up from 3.4% in August.

Read more: UK inflation back to double-digits as price rises hit 10.1% in September

It comes as the government last month announced a stamp duty tax break for homebuyers as the cost of living surges.

Stamp duty land tax (SDLT) is a lump sum payment you have to make when purchasing property over a certain threshold.

Under the plans announced in September as part of the mini-budget, no stamp duty needs to be paid on the first £250,000 of a property – up from the previous £125,000 threshold.

First-time buyers do not have to pay any stamp duty on property up to £425,000, up from £300,000.

The value of a property on which first-time buyers can claim relief also increased, from £500,000 to £625,000.

Watch: Will UK house prices ever fall?