UK house prices have recorded their most notable monthly fall in more than two years, according to fresh figures from mortgage lender Nationwide. This unexpected dip has sparked renewed discussion about the state of the property market and what might lie ahead.
The data shows that in June, average house prices fell by 0.8%. This marks the sharpest monthly decline since February 2023, and has come as a surprise to many, given the relative stability seen earlier in the year.
Nationwide suggests that this drop could be partly linked to recent changes in stamp duty, which came into effect in April. These changes appear to have cooled demand as potential buyers reconsidered their budgets and plans.
Despite the fall last month, house prices over the year were still 2.1% higher than the same time last year. However, this figure is the lowest annual growth rate seen in nearly a year, signalling that the pace of growth in the market has slowed noticeably.
Even so, the building society remains cautiously optimistic about the future. Nationwide predicts that activity within the housing market could start to pick up again over the coming months as the market finds its balance.
Robert Gardner, who serves as Nationwide’s chief economist, believes there are still plenty of factors that could help support buyers. One positive sign he highlighted is that the UK unemployment rate remains low, which helps give many households more financial confidence.
In addition, average earnings continue to rise faster than inflation, giving many people slightly more room in their budgets. This is an important change compared to previous years, when rising prices often outstripped wage growth.
Gardner also noted that borrowing costs could fall further if the Bank of England decides to cut the base rate later this year. Cheaper mortgage rates could help to stimulate demand, making home ownership more affordable for some buyers.
One of the biggest factors shaping recent market trends has been the changes to stamp duty rules introduced in April. Under the new rules, house buyers in England and Northern Ireland now pay stamp duty on homes priced over £125,000 – a much lower threshold than the previous £250,000.
First-time buyers were also affected. Previously, they only paid stamp duty if a property cost more than £425,000. Now, the threshold has dropped, and first-time buyers have to pay the tax on homes priced over £300,000.
Experts say these changes led to a flurry of buyers rushing to complete transactions before the end of March to avoid the new tax rules. According to Matt Swannell, chief economic adviser to the EY Item Club, this rush temporarily inflated the market and distorted figures.
Since April, activity in the housing market has slowed down as buyers and sellers adjusted to the new thresholds. However, Swannell believes this softer period is only temporary, pointing to a recent rise in mortgage approvals as a sign that momentum could return soon.
Rosie Hooper, a chartered financial planner at Quilter Cheviot, shares this view. She explained that the housing market is still digesting the impact of the stamp duty reforms, but she expects buyers and sellers to gradually adapt over the coming months.
Hooper believes that once the changes become the new normal, the initial disruption will fade. She thinks that first-time buyers and movers alike will soon resume plans, helping to stabilise the market once again.
It’s also important to keep in mind that Nationwide’s figures only reflect its own mortgage lending data. This doesn’t include buyers who purchase properties outright with cash, or those buying homes as rental investments. Since cash buyers make up about a third of all property transactions, the complete picture of the market may be broader and more complex than these figures alone suggest.
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