According to Halifax, the average house price in the UK has experienced a decline for the fourth consecutive month. This decline is attributed to higher borrowing costs, which have led first-time buyers to opt for smaller homes. In July, the average price fell by 0.3%, with the typical UK home costing £285,044, compared to its peak of £293,992 in August of the previous year. Although property prices were down 2.4% compared to the same period last year, there was a slight improvement from a 2.6% fall in June. The biggest decrease in property prices was observed in the south-east, where prices were down 3.9% in July, resulting in a decrease of over £15,500 in the value of a typical property in the region. All other regions in the UK, including Wales, also experienced downward pressure on property prices, except for the West Midlands, where prices remained stable. Despite the decline in prices, Halifax noted that the housing market has demonstrated resilience in the face of challenging economic conditions. First-time buyers are particularly active in the market, as some are now considering smaller homes to offset the higher costs of borrowing. The buy-to-let sector, however, is facing pressure due to increased interest rates and the anticipated impact of future rental market reforms. Additionally, rising interest rates, which were raised to 5.25% by the Bank of England, are further impeding housing market activity. Nevertheless, factors such as strong wage growth and low unemployment levels are providing support to the housing market, although higher interest rates are likely to persist in the coming years. This affordability squeeze is expected to lead to a continued decline in house prices, albeit gradually, throughout the next year. Despite this decline, average house prices remain £45,000, or 19%, higher than pre-Covid levels. Estate agents and property experts agree with the Bank of England’s analysis, expecting house prices to continue falling due to affordability issues. While a 5% decline in prices is anticipated for 2023, demand is expected to remain relatively resilient due to wage growth, lockdown savings, longer mortgage terms, leniency from lenders, and the popularity of fixed-rate deals. However, the decrease in house-buying activity has raised concerns, as LSL Property Services warned of substantially lower full-year profits due to changes in the home loans market driven by interest rate increases. Revenues for the first half of the year fell to £104m from £160.9m in the previous year for LSL, a major estate agency and mortgage business in the UK.
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