Average asking prices for UK homes fell for the third month running in August, according to Rightmove. The property website said that asking prices – a useful barometer for market sentiment – dropped by 1.3% (£4,969) this month to £368,740.
While this is in line with the average for August, it follows "bigger than usual falls" in the previous months. The drop in July was the biggest in more than 20 years recorded by the company.
What's happened to house prices?
Property prices may not yet have crashed "on the surface", said The Telegraph earlier this year, but the housing market has not recorded real price growth – "when adjusted for inflation" – since 2022.
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London, long the driver of nationwide house price growth, has seen the UK's largest drop in average asking prices. Prices fell by 2.6% in August, taking the annual change to a fall of 1.6%. By contrast, year-on-year prices have risen the most in Wales (up 3%) and Scotland (2.9%), followed by the Northwest (up 2.6%) and the West Midlands (1.8%).
Overall sales activity remains "strong, fuelled by lower mortgage rates and more choice of property on the market", said Forbes. The number of property sales agreed has risen by 8% since this time last year, the highest level since 2020. And the "number of homes on the market is up by 10% year on year".
Even the recent month-by-month drop in prices is interpreted by Rightmove as "savvy summer sellers" pricing "realistically to attract holiday-distracted buyers". This in itself is boosting sales activity. And other data, from banks such as Halifax and Nationwide, painted a slightly more positive picture for prices.
What could cause a price crash?
The performance of the market over the summer "may well be a sign that prices are starting to decline significantly", said Matthew Lynn at MoneyWeek.
The stagnating economy means "there are fewer people with money to spend on a new home". Second-home owners are also "quitting", adding huge amounts of extra supply. At the same time, "taxes and green levies are still increasing", meaning people who had planned to upscale may not be able to afford to, which will "choke off demand". And there is a "looming fiscal crisis" which could force the Bank of England to raise interest rates – a move "that would be the trigger for a full-scale collapse in house prices".
With the housing market already "at a low ebb" and "millions of heavily indebted households" about to "come off cheap fixed-rate loans taken out when borrowing costs were at rock-bottom", said The Telegraph this week, "Britain's homeowners are heading towards a cliff edge".
So what will happen to the price of your house?
Despite the warning signs, the high number of sales agreed and the "stable level of new buyer demand bode well for the next couple of months," said Colleen Babcock at Rightmove. "We usually see a busier autumn compared to the summer as the new school year starts and more focus returns to moving home."
The longer-term outlook is less certain and likely to vary from region to region, especially as the government pushes lenders to loosen affordability rules, and analysts weigh up the possibility of another rate cut by the Bank of England this year.
Rightmove has cut its forecast for this year's increase in overall property prices from 4% to 2% and Zoopla has halved its forecast from 2% to 1%, due to a greater supply of homes for sale and mortgage rates remaining higher than expected.
"This level of house price growth is not necessarily a bad thing for the UK housing market," said Zoopla's executive director of research, Richard Donnell. "It allows affordability to improve, as long as there is enough market confidence for people to continue listing their homes, agreeing sales and getting the house move they're after."
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