UK house price growth slowed in July while private rents continued to accelerate, a widening divergence between the sales and rental markets, according to the latest ONS data.

ONS Private Rents and House Price data published today showed average UK house prices rose 1.4% in the 12 months to July to £273,000, down from annual growth of 1.5% in June.

Private rents, meanwhile, continued to rise, increasing 3.8% year on year to £1,400 a month in August, up from 3.7% in July.

Rent inflation was strongest in the North East and North West, both at 5.8%, while the South East recorded the lowest growth at 3.0%. Wales also recorded stronger annual house price growth than England, at 2.6%, followed by Scotland at 2.3%. England recorded growth of 1.1%.

It is widely expected that the Bank of England's (BoE) forthcoming base rate decision and the next Budget could influence market confidence.

Chris Storey, chief commercial officer of Atom bank called today's data "a turning point in house point growth".

Storey said: "Given the latest Lloyds house price index - which is more up to date - has reported the first annual house price fall in three years, we are likely to see further falls play out in next month’s ONS data. Against the current backdrop, the market has been driven by those who feel moving is a necessity, rather than by aspirational buyers.

“Having risen to 3.1% today, inflation is forecast to increase in the months ahead. The expectation is that the Bank of England will increase Base Rate, which will further dampen enthusiasm among buyers. We would ordinarily expect activity to pick up now following the summer holidays and as buyers attempt to complete deals before Christmas, but don’t be surprised if the market remains more subdued than usual.”

Nick Leeming, chairman of national estate agency Jackson-Stops, said the figures showed that realistic pricing was increasingly determining which properties sell.

“This is not a market without demand, but it is one in which price and strategy matter considerably. With borrowing costs and the wider cost of moving continuing to shape affordability, sellers who are serious about moving need to respond to the market ahead of them rather than the market of a year or two ago,” Leeming said.

Rental growth, meanwhile, is continuing to put pressure on tenants and landlords. Alex Upton, managing director of specialist mortgages and bridging finance at Hampshire Trust Bank, said higher rents were “masking some of the pressures landlords are dealing with”, with rising operating costs limiting the impact on returns. “Higher rents do not automatically mean stronger returns,” he said, adding that investors were increasingly focusing on owning the right properties rather than simply expanding portfolios.

Upton said there was growing interest in HMOs and other specialist property types, while warning that build-to-rent alone could not replace the supply provided by individual and professional landlords. “We need a diverse rental sector if we are going to meet tenant demand,” he said.

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