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UK home asking prices experienced their largest drop in August since 2018, signaling a slowdown in the property market after four consecutive months of declines.
According to data from property portal Rightmove, new sellers listed their homes for an average of £364,895 in the five weeks leading up to August 12, which is £7,012 less than the previous month. This represents the biggest decline for this time of year since the onset of the Covid-19 pandemic.
Despite record wage growth and lower mortgage rates, the drop in asking prices suggests a slight improvement in affordability for UK homebuyers who have struggled with high borrowing costs due to multiple interest rate increases by the Bank of England.
In July, the average house price decreased by 0.3%, and experts predict that house prices will continue to decline throughout the year.
However, despite the 1.9% decrease in asking prices, the average house price remains nearly 20% higher compared to August 2019, before the onset of the pandemic, according to Rightmove.
“While challenges such as saving for a deposit and affording higher mortgage payments continue to exist, prospective buyers are now likely to have more options in their area, increasing the likelihood of finding a suitable home compared to during the pandemic,” said Tim Bannister, director at Rightmove.
According to data published by the Office for National Statistics, regular pay (excluding bonuses) saw an annual rise of 7.8% between April and June.
Rightmove also reported a decrease in the average five-year fixed mortgage rate, from 6.08% at the end of July to 5.81%. However, mortgage experts warn that rates are unlikely to drop below 5% this year.
Nicholas Mendes, mortgage manager at John Charcol, stated that the decrease in mortgage costs has only provided slight relief to households with stretched budgets, and affordability will remain a hurdle for potential homebuyers. He added that buyers are increasingly considering less popular and cheaper areas.
According to Rightmove, the number of agreed sales in the period was 15% lower than in 2019, primarily due to high borrowing costs. However, sales for properties typically appealing to first-time buyers remained more resilient, with only a 10% decrease in the same period.
Asking prices for homes attractive to first-time buyers decreased by 1% annually, while average advertised rents for similar properties increased by 12%.
“Owning your own home continues to be an appealing option for those who can afford it, especially considering the highly competitive rental market with record-high rents,” stated Bannister.
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