UK house prices fell 2.4% in July compared to the same period a year ago, but this was at a slightly slower pace thanks to a rise in activity from first-time buyers.
According to Halifax’s house price index, the average property price stood at £285,044, a 0.3% drop on the previous month, and a fourth consecutive monthly decline.
The fall is equivalent to a price drop of around £1,000 in cash terms, and compares to a peak of £293,992 last August. In June prices declined 2.6%, from 1.1% in May.
“The property market’s reset is turning into a marathon rather than a sprint," Jonathan Hopper, CEO of Garrington Property Finders, said.
"Looking ahead, the market’s price correction is likely to continue as cautious buyers price risk and higher borrowing costs into what they’re prepared to pay for a property. In response, sellers are being forced to accept the new market landscape if they want to move and the market’s soft landing is set to continue.”
House prices fell on an annual basis in almost all parts of the UK with the only exception being the West Midlands, which remained flat on the month. Average property prices in this region stayed at £250,285.
The South East of England was the area where house prices faced the most downward pressure, down 3.9% on an annual basis. This means that just over £15,500 has been taken off the value of a typical property here over the last year (average price now £382,489).
Greater London also mirrored the trend, with average house prices falling 3.5% to £531,141 annually in the capital.
Wales saw a 3.3% reduction on an annual basis, bringing average property values to £214,495, while in Scotland, prices were down by 0.7% over the last year to £201,501. In Northern Ireland they were down by just 0.3% annually at £185,322.
“While this was the fourth consecutive monthly decrease, all have been smaller than 0.5%,” Kim Kinnaird, director, Halifax Mortgages, said.
“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.”
For the 4th consecutive month - Avg house prices are chipped. In July 23 this was by -0.3% making the avg house now worth £285,044 down -2.4% annually and £8,948 less than Aug 22 peak. The South East & London are taking the biggest annual hit falling -3.9 & -3.5 @HalifaxBank pic.twitter.com/hgurpNuTJR
— Emma Fildes (@emmafildes) August 7, 2023
It comes as the Bank of England has hiked interest rates at 14 meetings, taking the cost of borrowing to 5.25% last week. This has pushed up the cost of mortgages and reduced the amount of money would-be buyers can borrow.
For the roughly 150,000 borrowers on tracker or variable rate mortgages in London, last week's hike meant an instant rise in mortgage payments.
However, for the majority of homeowners who are on fixed-rate deals, the effect will not be felt until their fixes expire.
Nicholas Christofi, managing director of Sirius Property Finance, said: "The heightened cost of borrowing will continue to squeeze the purchasing power of the nation’s homebuyers, who have little choice but to offer less, or opt for smaller homes.
"This will inevitably cause house prices to cool further over the coming months, however, this will come in the form of a gradual reduction, not a cliff edge.”