According to Rightmove’s newest House Price Index, there was a sharp decline in house prices, the first recorded by the property portal this year.
The 1.3% decline in house prices in August means that the average house price in the UK stands at £365,173, a reduction of £4,795.
While it is the first price drop that Rightmove has registered this year, Halifax has reported a modest 0.1% decline in house prices in July, in their own House Price Index.
With this decline this month, the annual growth rate of house prices is currently at 8.2%. And Rightmove expects that house prices will have grown by 7% by the end of the year compared to last year.
Usual Decline In House Prices For Summer Slump
Although this fall in house prices seems to indicate that the housing market is slowing down, the property portal states that this is a seasonal drop that occurs every year.
The fall of 1.3% is also in line, so Rightmove suggests, with the average price drop in August over the past ten years.
A drop in asking prices is to be expected this month, as the market returns towards normal seasonal patterns after a frenzied two years, and many would-be home movers become distracted by the summer holidays. Indeed, for those that can, this may be their first summer holiday abroad since before the pandemic.Tim Bannister, Director of Property Science at Rightmove
With the holiday season in full swing, and people actually being able to travel this year, many put their plans to move house off until autumn.
And those who want to move into their new home before Christmas lower the price of their property to ensure they beat the currently lengthy purchase process by finding a buyer fast.
Given that the average time between accepting an offer and completing the sale is four and a half months, sellers have no time to lose.
Biggest Drop For Top Of The Ladder Sector
While first-time buyer homes have only seen a moderate decline in house prices of 0.4%, top of the ladder homes have seen prices drop by 2.6%.
An average first-time home now costs £224,091, whereas a home at the top of the ladder costs £665,304.
House prices for second-stepper homes have been stable, with an average price of £338,757.
This means the annual growth rate for second-stepper homes stands at 9.4%. First-time-buyer homes and top of the ladder properties stand at 7.4% and 7.9% respectively.
Demand Continues To Slow Down
Buyer enquiries continue to fall and are 4% lower than in 2021, when the stamp duty holiday stimulated the housing market. However, compared to pre-pandemic level, in 2019, demand is up by 20%.
While the sixth consecutive rise in interest rates, most recently from 1.25% to 1.75%, combined with the rising cost of living will force potential buyers to re-consider what they can buy, for now the will to move is still strong.
Several indicators point to activity in the market continuing to cool from the lofty heights of the last two years. It’s likely that the impact of interest rate rises will gradually filter through during the rest of the year, but right now the data shows that they are not having a significant impact on the number of people wanting to move. Demand has eased a degree and there is now more choice for buyers, but the two remain at odds and the size of this imbalance will prevent major price falls this year.Tim Bannister, Director of Property Science at Rightmove
On the other side of the coin, new listings are up by 12% compared to last year, but down by 6% on 2019 figures. And the number of homes available to buy is down by 39% compared to 2019.
Even first-time buyers are still keen to get onto the housing ladder, although they now have to expect monthly mortgage payments of over £1,000, while having to put down a 10% deposit.
This is an increase of 27% compared to the start of this year. Due to the steep rise in house prices over the past year, a 10% deposit is now also much higher, with £22,409 needed.
These factors combined put pressure on buyer affordability, especially for first-time buyers.
House Prices More Than Doubled In Past 20 Years
The Rightmove House Price Index celebrates its 20th year this month. Since the first publication house prices have risen a staggering 134%.
While 20 years ago the average house price was £155,994, today a buyer has to fork out £365,173.
With that, house prices have outperformed salaries, which have only risen by 76% in the same period, and the Retail Price Index, which has increased by 93% over the past 20 years.
Whether this marked decline in house prices this month is the first sign of the housing market slowing down or just the seasonal summer slump, only time will tell.