UK house prices suffered their sharpest annual fall in 14 years, as the seasonal summer slump and high mortgage costs dragged on sales.

Data released by Halifax yesterday revealed that property prices fell by an average of 4.6% in August compared with the corresponding month in 2022, marking the sharpest year-on-year decline since 2009.

It means that the price tag of the typical UK home has dropped by about £14,000 over the past 12 months to £279,569 – the lowest level since early 2022.

Kim Kinnaird, director of Halifax Mortgages, said a traditional slowdown in house buying over the summer months also played a role in last month’s slump, but Halifax is predicting a further fall in property prices into the new year.

Industry reaction: 

Matt Thompson, head of sales at Chestertons, said: “With higher interest rates impacting on UK households, property buyers are adopting a more strategic and flexible property search by adjusting their budget or widening their search criteria to find a suitable home. Although some buyers took a break during the August holidays, others utilised last month to enter price negotiations or seal the deal by signing contracts.”

Nathan Emerson, CEO of Propertymark, commented: “House prices are thankfully adjusting to more sensible levels alongside increases to people’s earnings and the number of properties selling below asking price is increasing, offering homebuyers the opportunity to negotiate. These factors are all playing a part in increasing homebuyers’ affordability and softening the blow of rising interest rates.

“However, despite how this may look on the face of things, sellers are rightly still motivated to sell as they continue to make a healthy gain on their property price.”

Nicky Stevenson, managing director at Fine & Country, remarked: “The rise in borrowing costs combined with traditional summer slowdown have put the brakes on house price growth, although average prices remain well above pre-pandemic levels.

“The number of properties available for sale remains constrained compared to 2019, which was a fairly typical year for the housing market. This is playing a part in preventing bigger falls in prices even though affordability is tight.

“While demand has slowed over the summer, this matches normal seasonal patterns and is expected to build again as we head into autumn.

“Mortgage lenders are competing for business again and bringing down their mortgage rates accordingly, which will ease pressure on home-buyers and will further prop up demand over the coming months.

“If a pause in base rate rises does materialise this year, this should further boost buyer confidence.”

Tom Bill, head of UK residential research at Knight Frank, said: “House prices have fallen as mortgage rates have risen but the political and economic volatility of the last 12 months has taken its toll on sentiment. Buyers and sellers knew interest rates would rise after being close to zero for 14 years, they just didn’t expect it to feel like being strapped into a roller-coaster.

“We don’t anticipate a cliff-edge moment for prices but a single-digit decline this year is likely to be repeated next year. A strong jobs market, lender flexibility and the prevalence of fixed-rate deals in recent years will all act as shock-absorbers but sentiment will only improve when there is more certainty that the current cycle of rate hikes is over. Even then, the adjustment to higher borrowing costs and the looming general election mean we don’t expect a housing market firing on all cylinders.”

Jonathan Hopper, CEO of Garrington Property Finders, commented: “Despite the emergence of some prematurely optimistic voices, this is no passing wobble for the property market.

“The reason is affordability. Interest rates have risen a lot and average house prices have come down a little – at least compared to how high they were.

“With this monthly drop, questions will be asked about the rate of descent, and whether we’re still on course for a soft landing.

“The rising cost of mortgages, and the reduced amount of money that would-be buyers can borrow, have not been sufficiently offset by falling prices.

“As a result, some buyers who need a mortgage to fund their purchase are either postponing things in the hope prices fall further, or looking for a smaller home in a cheaper area.

“Meanwhile at the top end of the market, cash buyers sense that their hand is getting ever stronger.

“Those with a decent amount of cash behind them can afford to be more pragmatic in how they structure their finances and their house-hunting strategy. And while everyone is wary of paying a price now that might be lower in six months’ time, committed, proceedable buyers find themselves in a commanding position as sellers now regularly accept offers well below asking price.”

Iain McKenzie, CEO of The Guild of Property Professionals, said: “The volatility in house prices continues with the steepest drop since the disastrous effects of last year’s ‘Mini-Budget’ began to unravel.

“Sellers may be worried that the value of their home is falling, but keep in mind that it is still worth significantly more than it was prior to the pandemic. The readjustment we have seen this year merely puts us back to early 2022 levels.

“Much of this change is influenced by the greater flexibility in asking prices that we are seeing across the country. The South of England is particularly impacted by the fall in house prices, although many first-time buyers in parts of the South have found the market unaffordable for years.

“The landscape is unlikely to change anytime soon. The continued demand for good quality housing is keeping house prices propped up, but affordability concerns and the slower rates of mortgage approvals is stopping growth.

“The autumn months are usually still busy, as Brits look to hunker down in their new homes before the winter weather kicks in. It remains to be seen whether we will continue to see these sudden drops in house prices.”

Jason Tebb, CEO of OnTheMarket, commented: “As the annual decline in average property prices continues, the high cost of living and numerous rate rises are impacting how much buyers are willing and able to pay for their next home.

“However, given all the economic uncertainty it is remarkable how relatively stable the market appears to be following a period of unprecedented house price growth fuelled by lack of supply and demand.

“There are fewer speculative buyers and those who are out there are committed and focused on moving, although they are much more price sensitive than 12 months ago when prices hit record highs. Sellers should seek advice from an experienced agent to ensure they come to market at the right level to attract them.”

James Forrester, managing director of Barrows and Forrester, added: “Such a sharp annual decline will certainly spur panic amongst the nation’s homebuyers and sellers at first glance. But it’s important to remember that this time last year the market was flying high at the peak of the pandemic price boom, so it would have taken a monumental spike in market activity this time around to avoid an annual decline in property values.

“It’s also important to note that August is peak silly season in the UK property market and so there is very much a seasonal influence at play here. Buyers, sellers and property professionals alike will have taken time off for their summer breaks, the result of which is a reduction in market activity and a more sluggish rate of house price growth.”