Nearly £1,000 was wiped off the average UK house price between June and July, according to an index.
The average property value fell by 0.3%, marking the fourth monthly decline in a row, Halifax said.
House prices dropped by 2.4% on an annual basis, easing from a 2.6% fall in June.
The typical UK home cost £285,044 in July, down from a peak of £293,992 last August.
Average UK house prices edged down slightly in July, with the monthly fall of 0.3% equivalent to a drop of around £1,000 in cash terms— Kim Kinnaird, Halifax Mortgages
In June this year, the average UK property value was nearly £1,000 higher than in July, at £286,011.
Kim Kinnaird, director, Halifax Mortgages, said: “Average UK house prices edged down slightly in July, with the monthly fall of 0.3% equivalent to a drop of around £1,000 in cash terms. While this was the fourth consecutive monthly decrease, all have been smaller than (minus) 0.5%.
“In reality, prices are little changed over the last six months, with the typical property now costing £285,044, compared to £285,660 in February.”
She added: “In particular, we’re seeing activity amongst first-time buyers hold up relatively well, with indications some are now searching for smaller homes, to offset higher borrowing costs.
“Conversely the buy-to-let sector appears to be under some pressure, though elevated interest rates are just one factor impacting landlords’ business models, together with considerations of future rental market reforms. It remains to be seen how many may choose to exit and what that could mean for the supply of properties available to buy.
While there have been recent signs of borrowing costs stabilising or even falling, they will likely remain much higher than homeowners have become used to over the last decade— Kim Kinnaird, Halifax Mortgages
“Prospects for the UK housing market remain closely linked to the performance of the wider economy. Several factors are providing support, notably strong wage growth, running at around 7% annually. And, while the uptick in unemployment is likely to restrain that somewhat, it seems unlikely to reach levels that would trigger a sharp deterioration in conditions.
“Expectations of further base rate increases from the Bank of England were tempered by a better-than-expected inflation report for June. However, while there have been recent signs of borrowing costs stabilising or even falling, they will likely remain much higher than homeowners have become used to over the last decade.
“The continued affordability squeeze will mean constrained market activity persists, and we expect house prices to continue to fall into next year. Based on our current economic assumptions, we anticipate that being a gradual rather than a precipitous decline. And one that is unlikely to fully reverse the house price growth recorded over recent years, with average property prices still some £45,000 (19%) above pre-Covid levels.”
Tom Bill, head of UK residential research at Knight Frank, said: “While we expect UK prices to fall by 5% in 2023, demand should prove more resilient than expected given the shock-absorber effect of strong wage growth, lockdown savings, the availability of longer mortgage terms, forbearance from lenders and the popularity of fixed-rate deals in recent years.”
Smaller homes in affordable locations close to major employment hotspots are the biggest draw at the moment— Nicky Stevenson, Fine & Country
Some property professionals said housing market activity is holding up among first-time buyers in particular.
Nicky Stevenson, managing director at estate agent group Fine & Country, said: “Smaller homes in affordable locations close to major employment hotspots are the biggest draw at the moment, and these are also enticing first-time buyers to the market.”
Kirsty Wells, director of St Leonards-on-Sea-based Blueprint Mortgages, said: “In the past few months, I have had a big increase in inquiries from first-time buyers, who are proving particularly resilient given market conditions.
“They are in a much stronger position currently as so many people have their properties on the market but can’t sell so building a chain is very tricky, whereas if a first-time buyer can come along and save the day, then they can negotiate a better price. I have seen clients negotiating around 5% off average asking prices recently.”
Jeremy Leaf, a north London estate agent, said: “A growing expectation that inflation and interest rates are nearing their respective peaks, combined with continuing strong employment, are all helping to underpin activity.
“Affordability is still a concern, especially for those on tighter budgets, often buying smaller properties so the market remains price sensitive.”
Gareth Lewis, managing director of property lender MT Finance, said: “The continued decline in house prices is unsurprising as the market remains impacted by rate uncertainty and affordability issues.
The housing market is resilient, there are still not enough houses to go around so we will likely continue to see strong values, even with so much uncertainty— Gareth Lewis, MT Finance
“Buyers are continuing to either play the waiting game or become more aggressive when offering on properties. But there are positive signs – there is still the desire to buy, but with a realignment with what is realistic or achievable in value.
“The housing market is resilient, there are still not enough houses to go around so we will likely continue to see strong values, even with so much uncertainty.”
Iain McKenzie, chief executive of the Guild of Property Professionals, said: “We are seeing a gradual readjustment in house prices, but we are still way above pre-pandemic levels, much to the disappointment of first-time buyers.
“The main summer months of July and August are generally slow periods for the property market, as house hunters shelve their searches for holidays. This impacts prices, as sellers in a rush to move may be inclined to lower their asking price to entice buyers in.”
Here are average house prices across the UK followed by the annual change in prices. The breakdowns are based on the most recent three months of approved mortgages, according to Halifax:
East Midlands, £238,876, minus 1.4%
Eastern England, £333,474, minus 2.4%
London, £531,141, minus 3.5%
North East, £167,594, minus 1.4%
North West, £223,962, minus 0.9%
Northern Ireland, £185,322, minus 0.3%
Scotland, £201,501, minus 0.7%
South East, £382,489, minus 3.9%
South West, £299,649, minus 3.3%
Wales, £214,495, minus 3.3%
West Midlands, £250,285, 0.0%
Yorkshire and the Humber, £203,631, minus 0.5%
