House prices 'little changed' over last six months as market shows resilience: Halifax

Average house prices dropped by -2.4% on an annual basis, easing from -2.6% in June, according to the latest Halifax house price index.

Average prices fell by 0.3% in July, a fourth consecutive monthly decline, however Halifax says the market is displaying some resilience with industry data showing increased activity.

The typical UK home now costs £285,044 versus its peak of £293,992 last August. But the figures show that prices are little changed over the last six months, with the average property in February costing £285,660.

House prices by region

Average house prices fell on an annual basis in almost all parts of the UK in July, with the only exception being the West Midlands, where they remained flat.

The South East remains the area where house prices are facing the most downward pressure. Down 3.9% by on an annual basis, just over £15,500 has been taken off the value of a typical property in the region over the last year.

Greater London mirrors that trend, with average property prices down by 3.5% annually in the capital.

Wales – home to some of the most rapid growth in house prices witnessed during the pandemic ‘boom’ – experienced a -3.3% reduction on an annual basis.

In Scotland, prices were down by less, at -0.7% over the last year, while in Northern Ireland they were down by just -0.3% annually.

Kim Kinnaird, director of 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 -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. The pace of annual decline also slowed to -2.4% in July, versus -2.6% in June. These figures add to the sense of a housing market which continues to display a degree of resilience in the face of tough economic headwinds.

“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.

“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.”

Jeremy Leaf, north London estate agent and former RICS residential chairman, commented: "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.

"Nevertheless, sellers recognising the importance of proceedable buyers and that the illusive golden offer may not be achievable, are taking advantage."

Iain McKenzie, CEO of The Guild of Property Professionals, added: “Despite four consecutive months of declining prices, the outlook for the property industry is not as gloomy as forecasts suggested at the beginning of the year. If the market was as weak as many predicted, house prices would be tumbling right now.

“Instead 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.

“The affordability factor is still weighing on the minds of most buyers, but particularly for first-time buyers that may be seeing their deposit not go as far. Others may face mortgage offers that aren’t as competitive as we’ve previously seen over the last decade.

“This squeeze will undoubtedly have an impact on sales, and we are anticipating a fall of around 20% by the end of the year.

“Tackling inflation is the number one priority, followed by committing to building homes which are truly affordable. This will ensure that more buyers are able to get their foot on the property ladder.”