Struggling market means capital appreciation rarely beats inflation rate

A new analysis suggests that despite a fall in inflation, the stuttering housing market means that just 56 areas of the UK have seen inflation-busting rates of house price growth over the last year, down from 75 in the previous year.

Octane Capital analysed current housing market data to reveal how many local authorities have seen house prices outperform the current rate of inflation (3.2%) over the last year and how this compares to the previous year when inflation sat at 10.1%.

While the UK’s rate of inflation has dropped significantly in the past year - falling from an extraordinary high of 10.1% in 2023 to 3.2% in 2024 - a flat national housing market means that fewer local authority districts have seen house prices outpace inflation when compared to the previous year.

Last year, no less than 75 local authorities saw house prices increase by more than 10.1% - equivalent to just over a fifth of the total UK market locations.

However, with the property market struggling of late, just 56 local authorities have seen house price growth exceed the current 3.2% rate of inflation - equivalent to less than a sixth of the UK market.

Despite this annual proportional decline, some areas of the county have continued to boast healthy price increases.

This year’s most successful inflation-busting market is found in Inverclyde where the average house price has grown by 13.8% over the past 12 months.

In Na h-Eileanan Siar, prices have increased by 11.9%, while Rossendale (+11.7%), Stroud (+9.8%), Ribble Valley (+9%), Midlothian (+8.3%), Orkney Islands (+8.2%), Blaby (+8.1%), and Derry City & Strabane (+8%) also rank inside the top 10 inflation-busting areas of UK housing market.

Other areas  include East Devon, West Lancashire, and South Derbyshire.

Octane Capital chief executive Jonathan Samuels says: “Despite a notable reduction in the rate of inflation over the last year, a sluggish housing market means that there are now far fewer property market pockets boasting an inflation busting rate of house price growth.

“However, the good news is that the UK market is widely expected to show signs of growth as we move into summer 2024, which should help boost house prices to inflation busting levels across more areas of the market.

“For owners, investors, and even buyers alike, the fact that house prices have not plummeted in the past year, despite everything that politics and the economy has thrown at it, shows that bricks and mortar remains one of the best, most reliable investments you can make.”