House prices continue on a downward slide

The housing market faced yet another setback as the average house price saw a decline of -0.3% in July, Halifax reports.

Its data shows this is the fourth consecutive monthly drop, and it is an average drop in value of £1,000.

However, signs of resilience are emerging, driven by increased market activity, though Southern England and Wales remain the regions most affected by falling property prices.

And the supply of homes for sale could be boosted by BTL landlords leaving the sector which could also affect prices.

The annual price drop is -2.4%, which is a slight improvement from the -2.6% decline seen in June.

Halifax says the current average cost of a typical UK home now stands at £285,044, down from last August’s peak of £293,992.

‘Prices are little changed over the last six months’

The director of Halifax Mortgages, Kim Kinnaird, 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.

“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.”

Ms Kinnaird says that the housing market is closely linked to the performance of the wider economy, including strong wage growth which is around +7% annually.

She adds: “The continued affordability squeeze will mean constrained market activity persists, and we expect house prices to continue to fall into next year.”

‘House prices have fallen year-on-year’

Nathan Emerson, Propertymark’s chief executive, said: “Even though house prices have fallen year-on-year, this does not compare to the dramatic price rises that we experienced last year.

“As house prices begin to steady, and with recent rises in wages, houses are becoming more affordable while equity is remaining stable.”

He added: “After recent positive inflation news bringing the potential for a peak in interest rates sooner than previously expected, there is also some hope that fixed mortgage rates will start to fall.

“Even as they remain high compared to recent standards, buyers are able to negotiate on price and come to a middle ground with sellers still able to make a healthy gain on the final sale price.”

‘Price correction is partly caused by higher interest rates’

Anna Clare Harper, the chief executive of sustainable investment adviser GreenResi, said: “This price correction is partly caused by higher interest rates. Housing policy has focused on homeowners’ needs, and on debt to fund new supply, for a long time. With higher interest rates, price growth is being corrected.

“Socially, the most important consideration is not the house prices but the cause: higher interest rates mean higher monthly housing costs, for both homeowners and renters. Higher housing costs are affecting affordability for at least two million households on variable rate mortgages or fixed rates coming to an end this year.

“To save ‘Generation Rent’ from homelessness, professional investors are needed to acquire, upgrade and stabilise existing private rental sector homes.”

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