UK annual house price growth slowed to 1.8% in July, from 2.2% in June, the latest Nationwide house price shows.
Prices remained broadly flat in month-on-month terms, after taking account of seasonal factors, edging up 0.1% month-on-month.
Robert Gardner, Nationwide's chief economist, said: “Market activity and house prices have remained soft in recent months, in part reflecting the uncertain economic backdrop. Geopolitical tensions remain high, with the conflict between Iran and the US again exerting upward pressure on energy prices and market interest rates in recent weeks. Financial market expectations for the future path of Bank Rate have been volatile, reflecting shifting views about the inflationary implications of events at home and abroad.
“Despite the ongoing risks from the latest energy price shock, the Monetary Policy Committee can take some comfort from the fact that consumer price inflation declined further in June. Signs that wage growth has continued to ease gives policymakers more breathing space to assess the extent to which tighter policy is necessary to ensure inflation returns to target."
Nicky Stevenson, managing director at Fine & Country, commented: “House price growth remains subdued, but the market is still holding steady in a way that is sustainable to both buyers and sellers.
“Annual growth easing to 1.8% shows that the market has lost some of the momentum we saw earlier in the year, but a small monthly rise suggests there is still underlying resilience. Buyers are active, but they are taking their time and weighing up affordability carefully before committing.
“The wider backdrop has been doing a lot of the work here. Higher energy costs and shifting expectations around interest rates have all tested confidence in recent weeks. It is no surprise that some buyers have paused for breath while they wait for a clearer picture on mortgage pricing and household costs.
“In many parts of the country, our agents are seeing that the activity is still there, so long as homes are priced in line with local demand and buyers feel they are getting fair value.
“July can also be a more measured month for the property market, as the intensity of the spring season gives way to the summer holiday period. That can make activity feel quieter on the ground, but it does not mean demand has gone away.
“What matters now is whether inflation continues to ease and gives lenders more room to compete on mortgage pricing. If borrowing costs become more predictable, that should help rebuild confidence among buyers who are ready to move but have been waiting for more certainty.”
Jason Tebb, president of OnTheMarket, said: “Average property values were flat on a monthly basis as focused, price-sensitive buyers negotiate, while sellers realise they will struggle to sell over-ambitiously priced homes when there is more stock to choose from.
"Despite the impact of renewed hostilities in the Middle East on inflation and subsequently interest rates, stalling the expected downwards momentum of base rate this year, the resilience of the market is evident. The signs are that the market has steadied itself and buyers and sellers are getting on with it. The Bank of England’s decision to hold interest rates again yesterday for the fifth consecutive meeting is having a steadying effect, suggesting a calm, considered approach with no need to panic.
"Mortgage rates are edging upwards, which may increase affordability concerns for buyers in the short term but those who need to move are doing so regardless and are just negotiating harder on the price they are prepared to pay. Inactivity isn’t an option for many, even if a new Prime Minister brings another level of uncertainty. What we do know is that Andy Burnham is instinctively interventionist and housing is where we will feel it first. For our sector, the likely picture is more regulation on the rental side and a real push on supply that will take years to show up in the numbers."
Nicholas Finn, managing director of Garrington Property Finders, added: “The summer slowdown started early this year. Several regional markets were sleepwalking even before the holiday season began.
“Higher mortgage interest rates have combined with an unwelcome dose of uncertainty to dampen buyer demand in many areas. People who need to move for work or life reasons continue to do so, but many discretionary buyers are opting to wait until the dust settles.
“As a result the few serious buyers who are out there are spoilt for choice and making the most of their powerful negotiating position. There’s a surfeit of homes for sale in London and the southeast; buyers who have their financial ducks in a row have their pick of the crop and can often secure sizable discounts off the asking price.
“The balance between supply and demand is more even in northern England. The creation of Number 10 North and the prospect of higher government spending in devolved regions is starting to fuel a Burnham bounce, accelerating price growth in areas where price rises were already robust.
“But with prices largely stagnant in London and the Home Counties, the North’s momentum is all but cancelled out in the national figures. Nationwide’s data shows price growth for the UK as a whole notched up from zero in June to just 0.1% in July. August, traditionally a quiet month for estate agents, is likely to offer more of the same.
“The big test will come in September, when the start of the school year fires the starting gun on househunting season. Mortgage interest rates settled in early July, though they have begun to tick up again in recent weeks.
“The cost of borrowing is still a barrier for some mortgage-dependent buyers, so if rates start coming down again we could see a welcome release of the demand that has been bottled up for the last few months.”
