"With very little movement in house prices over recent months, this rate of decline largely reflects the impact of historically high house prices last summer"
The average UK house price fell by 0.1% in June, the third consecutive monthly decline, according to the latest Halifax house price index.
The annual rate of house price growth fell to -2.6%, from -1.1% in May, the largest year-on-year decrease since June 2011.
The latest figures suggest some resilience in new build property prices, which are up by 1.9% annually. However, the rate of growth has continued to slow, and has now dropped to its lowest level in more than three years.
Existing properties, which were instrumental in driving prices up during the pandemic related housing rush, were down by -3.5% year-on-year in June, the steepest decline since August 2009.
Prices fell on an annual basis in June across all property types led by flats (-3.1%) and terraced homes (-2.5%). The declines for semi-detached and detached homes were -1.9% and -1.3% respectively.
Regional house prices
Average house prices are now falling on an annual basis in most parts of the UK, with the only exceptions being the West Midlands (+1.5%, average house price of £251,139), along with marginal gains in Yorkshire & Humberside (+0.2%, £203,674) and Northern Ireland (+0.2%, £186,856).
The South of England remains the area where house prices are facing the most downward pressure. At -3.0%, the annual fall in the South East was the largest since July 2011.
London recorded an annual decline of -2.6% (average property price of £533,057), its weakest performance since October 2009 and a drop of around £15,000 over the last year.
Welsh house prices were down by -1.8% annually (average house price of £215,183), compared to a +1.0% increase in May – the nation’s first year-on-year fall since March 2013.
In Scotland, prices were down slightly on the year (-0.1%, average house price of £201,774), but nonetheless significant in being the first annual contraction in property prices in the last three years.
Kim Kinnaird, director of Halifax Mortgages, said: “The average UK house price fell slightly in June, down by around £300 compared to May (-0.1%) with a typical property now costing £285,932. This was the third consecutive monthly fall, albeit it a modest one.
“The annual drop of -2.6% (-£7,500) is the largest year-on-year decrease since June 2011. With very little movement in house prices over recent months, this rate of decline largely reflects the impact of historically high house prices last summer – annual growth peaked at +12.5% in June 2022 – supported by the temporary stamp duty cut.
“To some extent the annual growth figure also masks the fluctuations we’ve seen in the market over the past 12 months. Average house prices are actually up by +1.5% (£4,000) so far this year, with most of that growth coming in the first quarter, following the sharp fall in prices we saw at the end of last year in the aftermath of the mini-budget.
“These latest figures do suggest a degree of stability in the face of economic uncertainty, and the volume of mortgage applications held up well throughout June, particularly from first-time buyers. That said the housing market remains sensitive to volatility in borrowing costs. Concerns about persistent inflation have led to a significant increase in the cost of funding. Coupled with base rate rising by another 50bp, this contributed to a big jump in typical mortgage rates over the last month.
“The resulting squeeze on affordability will inevitably act as a brake on demand, as buyers consider what they can realistically afford to offer. While there’s always a lag effect when rates go up, many existing mortgage holders with variable deals or rolling off fixed rates will likely face an increase in the next year.
“How deep or persistent the downturn in house prices will be remains hard to predict. Consumer price inflation is likely to come down in the near term as energy and food prices look set to reverse their steep rises, but core inflation is clearly proving stickier than originally expected. With markets now forecasting a peak in Bank Rate of over 6%, the likelihood is that mortgage rates will remain higher for longer, and the squeeze on household finances will continue to put downward pressure on house prices over the coming year.”
Tomer Aboody, director of MT Finance, commented: "Although we have seen a fall in the demand and pricing, this is far from the expected or predicted downward trend. The sentiment is that the market is keeping a stiff upper lip, with buyers and sellers still out there, making the impact less volatile.
"Of course, the continued interest rate rises are impacting buyers, as people wait to see where the new norm settles, but we are not seeing the 'crash' that many were expecting because proportionately very few people are being affected by the rate hikes, since most are currently on fixed mortgages.
"Maybe it's time for the Bank of England to let the market breathe and see how the rate increases actually make an impact before continuing to choke it."
Jonathan Hopper, CEO of Garrington Property Finders, added: “Only the weather was hot in June. The UK’s hottest June on record was decidedly cool on the property market.
“But this is far from the deep freeze many had feared. True, the average home is worth £7,500 less than it was at the same time last year. But it has also risen £4,000 since the start of 2023, according to the Halifax’s data.
“The surging cost of mortgages is having a chilling effect – but the impact is greatest on the number of homes being sold rather the prices people are paying for them.
“Nevertheless pricing behaviour is shifting. Some forward-thinking sellers are cutting their asking price pre-emptively to get ahead of the market, rather than slicing thousands off in response to a low offer.
“For many, this will be a bitter pill to swallow, albeit one that is preferable to the limbo of having their home sit unsold for months before they cut the price anyway.
“Meanwhile most buyers are being pragmatic and prudent rather than gung ho. Everyone is price sensitive and wary of overpaying, but we are seeing proceedable, cash-rich buyers focus less on how prices might move in the next month or two and more on how best to play their strong hand to secure a significant discount now.
“In some areas double-digit price reductions are not uncommon, with the regions that saw the frothiest excesses during the boom, as well as those with high levels of Help to Buy ownership, seeing the sharpest falls.”
