Douglas Fraser
Business and economy editor, BBC Scotland

Image source, PA Media

While consumer prices continue to rise, and faster than the
Bank of England target 2%, household bills are being more stretched by
increases in housing costs.

Private landlords are charging ever higher rents, partly
because their finance costs have gone up, and partly because they can. And that
affects nearly a fifth of UK households.

Rising rent reflects a mismatch of rental housing supply and
demand for it. For those in the most pressured areas, such as London and other
big cities, it means tenants have to pay a high share of income on monthly
rent.

But in England and Wales, seven in 10 council areas are
seen by statisticians as having “affordable” rents, averaging less than 30% of
income. The Office for National Statistics (ONS) estimates the affordability of rent,
as a share of household income, was close in 2023 to the level eight years
before.

House prices are linked to the rental market, but only
loosely. They vary with buyer demand and seller supply, including newly-built
homes.

Short-term demand changes are often driven by the cost of
borrowing, and the forecast path for interest rates, which contribute to
pricing of fixed-price mortgages.

One interesting change in today’s figures is a shift in the
typical home being bought and sold. The ONS figures reflect a shift since it
last estimated this for 2015, away from bigger, more expensive properties and
from the more expensive parts of the country. So the average price, based on
the market in early 2023, has been reduced by 7.9%. That does not change the
price inflation rate, however.