September 2023: First-time buyers seeking smaller homes keep the market energised

Fri 01 Sep 2023

The latest release by the Halifax reported that UK house prices saw a slight -0.3% drop in July, around £1,000 less in value, marking the fourth consecutive small decline. Prices have remained relatively stable over six months, averaging £285,044 while the annual decline eased to -2.4% in July from -2.6% in June.

First-time buyers are active, seeking smaller homes due to higher borrowing costs, while the buy-to-let sector faces pressure.

The housing market's resilience is tied to the wider economy, supported by strong wage growth, though affordability constraints are expected to lead to gradual price declines into the next year, still leaving prices above pre-Covid levels by around £45,000.

“Elevated long-term interest rates contribute to stretched housing affordability, causing subdued market activity.”

Nationwide, meanwhile, report that UK annual house price growth dipped further into negative territory in July, with a 0.2% monthly decline and an annual drop of -3.8%, compared to -3.5% in June. The average home price is now 4.5% below the August 2022 peak. Elevated long-term interest rates contribute to stretched housing affordability, causing subdued market activity.

While there's potential for a relatively mild decline if economic conditions align with expectations, unemployment remains low, and fixed-rate mortgages should help borrowers withstand higher costs. Improved affordability might come with time and moderating mortgage rates post-Bank Rate peak.