Housing market remains resilient despite a fourth consecutive monthly decline in prices: Halifax

Average house price fell by -0.3% in July in almost all parts of the UK, according to the latest data released this morning by Halifax.

Related topics:  Property,  house prices,  Halifax
Property | Reporter
7th August 2023
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"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"

Aside from the West Midlands where they remained flat, average house prices fell slightly across the rest of the UK - marking the fourth month in a row to see a decline.

The latest data released by Halifax this morning shows that property prices dropped by -2.4% on an annual basis, easing from -2.6% in June with a typical UK home now costing £285,044 (vs peak of £293,992 last August)

The South East remains the area where house prices are facing the most downward pressure. Down -3.9% 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 (average house price now £382,489).

Greater London mirrors that trend, according to the figures, with average property prices down by -3.5% annually in the capital (average house price now £531,141).

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 (average house price now £214,495).

In Scotland, prices were down by less, at -0.7% over the last year (average house price of £201,501) while in Northern Ireland they were down by just -0.3% annually (average house price of £185,322).

Kim Kinnaird, Director, Halifax Mortgages, comments: “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.”

Nathan Emerson, CEO of Propertymark comments: “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. 

"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." 

Nigel Bishop, founder of buying agency Recoco Property Search, says: “Despite discussions about mortgage rates taking place, we are seeing discerning house hunters entering the market who are mostly cash buyers seeking a luxury country property as either a primary residence or holiday home.

"With many professionals still working from home or splitting their time between home and the office, buyers have been prioritising properties that provide a work-life balance. Spacious homes with private gardens and properties in proximity to parks and other lifestyle amenities as well as easy access to London have been particularly sought-after.”

John Ennis, CEO of Chestertons, says: “Whilst there were fewer first-time buyers with support from the Bank of Mum and Dad in July, we witnessed an increase in cash buyers and higher-valued property sales in excess of £1mn. This was driven by continuously strong demand for larger family homes in London’s leafier suburbs as well as luxury townhouses in areas such as Islington and Kensington.”

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

Tom Bill, head of UK residential research at Knight Frank says: “The journey back to long-term rate normality has been fraught and put downward pressure on house prices and sales volumes over the last year. The previous government went too far, too fast for financial markets and the Bank of England has been accused of doing too little too late.

"However, some lenders are cutting mortgage costs as the bank rate nears its peak, which means that while sentiment will remain subdued, it should improve in the second half of this year. While we expect UK prices to fall by 5% in 2023, demand should prove more resilient than expected given the shock-absorber effect of strong wage growth, lockdown savings, the availability of longer mortgage terms, forbearance from lenders and the popularity of fixed-rate deals in recent years.”

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