House prices saw a marginal dip of 0.1% in July, the first signs of cooling in the market following a frenetic couple of years, according to the latest market analysis from Halifax.
Despite the fall, a typical UK property now costs £293,221 and it remains the case that price gains for bigger houses are noticeably outpacing those for smaller homes. The price of a detached house has leapt by £60,860 (+15.1%) over the last year, compared to £11,962 (+7.7%) for flats.
Regions and nations' house prices
Wales has moved back to the top of the table for annual house price inflation, up by +14.7%, with an average property price of £222,639. It’s closely followed by the South West of England, which also continues to record a strong rate of annual growth, up by +14.3%, with an average property cost of £310,846.
The rate of annual growth in Northern Ireland eased back slightly to +14.0%, with a typical home now costing £187,102.
Scotland too saw a slight slowdown in the rate of annual house price inflation, to +9.6% from +9.9%. A Scottish home now costs an average of £203,677, another record high for the nation.
While London continues to record slower annual house price inflation than the other UK regions, the rate of +7.9% is the highest in almost five years. With an average property now costing £551,777, the capital’s already recording average house price continues to push higher, up by £40,361 over the last year. It remains by far the most expensive place in the country to buy a home.
Russell Galley, Managing Director, Halifax, said: “Following a year of exceptionally strong growth, UK house prices fell last month for the first time since June 2021, albeit marginally (-0.1%). This left the average house price at £293,221, down £365 from the previous month’s record high. The rate of annual inflation eased slightly (to +11.8%), although it’s important to note that
house prices remain more than £30,000 higher than this time last year.
“While we shouldn't read too much into any single month, especially as the fall is only fractional, a slowdown in annual house price growth has been expected for some time. Leading indicators of the housing market have Average house price recently shown a softening of activity while rising borrowing costs are adding to the squeeze on household budgets against a backdrop of exceptionally high house price-to-income ratios.
“That said, some of the drivers of the buoyant market we’ve seen over recent years – such as extra funds saved during the pandemic, fundamental changes in how people use their homes, and investment demand, still remain evident. The extremely short supply of homes for sale is also a significant long-term challenge but serves to underpin high property prices.
“Looking ahead, house prices are likely to come under more pressure as those market tailwinds fade further and the headwinds of rising interest rates and increased living costs take a firmer hold. Therefore a slowing of annual house price inflation still seems the most likely scenario.
Emma Cox, Head of Real Estate at Shawbrook, said: “The housing market has been remarkably resilient to rising interest rates, high inflation and squeezed incomes. Limited stock and the strength of the labour market have kept growth in very strong territory.
“However, particularly in light of the Bank of England’s decision and forecasts this week, the market is likely to experience a cooling in the coming months. These pressures will inevitably slow the number of people looking to buy.
“Mortgage lenders remain committed to offering buyers a range of options to allow them to make their first or next steps on the housing ladder. It’s important for borrowers to review all the options on offer and consider locking in a fixed deal.
“In the long-term, the UK is desperate for more quality, energy-efficient housing to meet demand from first-time buyers, homeowners and renters. Housing policy must be high on the agenda of the incoming prime minister to help achieve that goal”.
Nathan Emerson, CEO of Propertymark, comments: “The market remains competitive for buyers, but the dynamic is changing. The effect of the wider economic climate on buyer confidence is starting to show through with our member agents reporting fewer viewings and buyers negotiating harder.
“That anecdotal evidence is reflected in our Housing Market Report which shows a rise in the number of sales being agreed at below the asking price, up 7 per cent year-on-year and 4 per cent month-on-month, while sales at asking price remain stable.
“We expect prices to stay roughly where they are for some time and that’s because the number of houses coming the market is fairly static and interest rates still at a historically low level despite the recent rises.”
Richard Davies, MD of Chestertons, says: “We have seen a clear uplift in the number of viewings and the number of buyers registering with our branches in July. This increase in market activity suggests that, despite economic challenges and the changes to mortgage rules, buyer appetite remains on an upwards trend.
“One driving factor behind house hunters wanting to move sooner rather than later are interest rates. With the Bank of England putting up rates more than once this year, many buyers have established a stronger sense of urgency. Another reason that drives buyer enquiries is that the market is seeing a post-pandemic reshuffle. After many house hunters put their search on hold or changed priorities over the past two years, we have since been registering enquiries from families wanting to finally make their move a reality as well as international students, international buyers and office workers who require a pied-à-terre closer to work again.
“Although demand still outweighs supply, there have been 8% more properties available for sale in July compared to June. Looking ahead, and in the event of more properties coming onto the market, buyers may benefit from less drastic increases in property prices."