House prices fell slightly in July, a month where prices usually stay steady, according to recent data from Rightmove. The property website revealed a 0.2% drop in prices, equivalent to a decrease of £905.
Rightmove attributed the dip to escalating mortgage costs, which have put increased pressure on prospective buyers. As of July, the average house price stood at £371,907.
Despite the decline, house prices are still 2.6% higher than they were in January, demonstrating resilience in the face of wider economic pressures. Over the year, prices rose by 0.5% in July, although this was a deceleration from the 1.1% increase observed in June.
Meanwhile, the number of agreed sales also dwindled, falling 12% behind June 2019’s level. This follows a robust performance in the first five months of 2023. The impact was more pronounced in the larger home sector, where agreed sales were down 14% compared to 2019. Smaller properties, with two bedrooms or fewer, saw a lesser but still significant dip of 9%.
Despite this, buyer demand actually increased by 3% compared to 2019 levels, with suitably priced homes garnering more interest due to a shortfall in property supply in recent years.
Tim Bannister, director of property science at Rightmove, explained the current state of the market: “The interest-rate brakes being applied more strongly to slow the economy are now beginning to bite in the housing market.
“While prices and sales bounced back this year much more strongly than most expected, the unexpectedly stubborn inflation figures and the surprise of further mortgage rate rises when many felt that they had stabilised, have contributed to the fall in prices and number of sales agreed.”
Bannister added that buyer demand remains resilient, buoyed by a scarcity of quality property for sale and ongoing housing needs. “First-time buyers, trader-uppers and downsizers with higher deposits and lower mortgage requirements appear to be still keenly searching the market, not wanting to miss out on the right property that is not over-priced and that they can still afford,” he said.
Reaction
Tomer Aboody, director of property lender MT Finance:
“With continued rate rises negatively impacting affordability, many would-be buyers are no longer even able to consider purchasing and the market is slowing accordingly.
“Sellers not selling due to fear of being knocked down on their expected price and fewer buyers around due to confidence and lack of affordability, is contributing to falling transaction levels and pricing.
“Further uncertainty as to whether inflation will reduce quickly enough, combined with the potential for more rate hikes, is making the market unpredictable with no breathing space in sight. Now seems an opportune time for the Bank of England to pause the rises and see how the market, which has already been squeezed, responds.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“These figures bear out what we’ve been seeing in our offices, particularly following the most recent increases in base rate.
“There are still plenty of especially cash or equity-rich buyers but they’re taking their time to view a slowly-increasing choice of properties.
“It’s only then – including after carrying out their own stress testing – that they’re making what are often cheeky offers.
“On the other hand, most sellers seem in no rush to accept significant discounts, at least for the time being.”
