UK house prices fell by 0.4% in the year to August, the first annual decline since November 2023, as economic uncertainty and borrowing costs weighed on activity.
Prices slipped by 0.2% over the month, following a 0.1% fall in July. The average property price stood at £298,468, compared with £299,153 a month earlier.
Despite the recent declines, prices remained 0.2% above their level at the start of the year.
Andrew Asaam, mortgages director at Lloyds, said sellers were reluctant to accept lower offers, while some buyers were waiting for greater clarity over market conditions.
He said: “The housing market has faced a more difficult backdrop in recent months, with the impact of global events on inflation and borrowing costs creating greater economic uncertainty. What we’re not seeing is a rush of homeowners cutting prices.
“But more are choosing to sit tight, with sellers reluctant to accept offers they feel are too low, while some buyers are waiting to see how conditions develop.
“As a result, fewer homes are changing hands, with latest industry figures showing mortgage approvals now at their lowest level since the start of 2024.”
Asaam said average house prices remained around 25% higher than at the end of 2019, with wage growth helping to ease some of the pressure on affordability from higher borrowing costs.
He said: “We expect the market to remain fairly subdued in the months ahead, but this will likely only have a limited impact on house prices. While affordability remains a challenge, wages continue to grow and employment has held up better than many anticipated.
“This will help to support demand from those who need or want to move.”
NORTHERN IRELAND LEADS ANNUAL GROWTH
Northern Ireland recorded the strongest annual growth in the UK at 6.9%. Although the pace eased, its average property price reached a record £231,245.
Prices in Scotland rose by 3.5% over the year to an average of £223,437. Wales recorded growth of 0.6%, taking the typical value to £230,282.
Within England, the North East recorded annual growth of 2.7%, with an average price of £184,370. Prices in the North West rose by 2.0% to £248,675.
The South East recorded the largest annual fall, with prices down 1.6% to £381,729. Greater London followed with a decline of 1.5%, taking the average to £534,177.
The South West and Eastern England both recorded annual falls of 1.2%, with average prices of £298,807 and £331,410 respectively.
BUYERS AND SELLERS AWAIT BUDGET
Nathan Emerson, chief executive of Propertymark, said rising household costs and pressure on affordability had contributed to caution in the market.
He said: “As we head into the autumn months, the upcoming Autumn Budget may well help determine the plans of many aspiring buyers and sellers for their next house move, alongside the upcoming inflation figures and interest rate announcement in the middle of the month.
“Following what has, in part, been an uneven year, it is hoped that the housing market will regain a more stable footing as the year progresses.”
BOND MARKET VOLATILITY
Ian Futcher, financial planner at Quilter, said: “Clearly, stretched affordability and an uncertain economic background has had a negative impact on house prices and unfortunately recent volatility in bond markets has the potential to put further pressure on mortgage rates.
“Swap rates have risen sharply in recent days and some lenders have already begun adjusting pricing in response. For first-time buyers who have spent months building a deposit and carefully calculating what they can afford, sudden shifts in mortgage rates can pull the rug from under their feet just as they are preparing to make a move. This uncertainty is likely one factor behind the softer market conditions now emerging.
“Attention will now turn to the Bank of England’s next decision on 17 September. While few expect policymakers to make any dramatic moves, the accompanying commentary could prove just as important as the decision itself.
“Markets will be looking for clues on inflation and the future path of interest rates, with any shift in expectations likely to feed through to mortgage pricing.
“Demand for homeownership remains strong, but buyers and sellers alike benefit from stability. When mortgage costs move around quickly, buyers can become more hesitant and transactions can take longer as finances are reassessed. The latest figures already point to a cooling in activity, with mortgage approvals falling and transaction volumes remaining subdued.
“If markets settle, housing activity should remain supported. However, if volatility persists, affordability pressures are likely to keep a lid on both transactions and house price growth, particularly among those trying to get onto the property ladder for the first time.”
