“People more interested in packing suitcases than boxes”, as house prices fall in August

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House prices fell 0.2% in August, but are still 3% below their all-time high in summer 2022, according to the Nationwide House Price Index.

The average house price is £265,375, up 2.4% year-on-year.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Homebuyers will be back after being limited to sun loungers in August, and a slight improvement in affordability will encourage them to get back into the home buying race. Concerns over the Budget will weigh somewhat on prices, but we expect house prices to rise moderately going forward.”

“August tends to have fewer buyers as people are more interested in packing suitcases than boxes. Prices have dropped slightly this month as the market has slowed, but it’s still positive when viewed over the year, and we expect the market to continue to perform well in September thanks to slightly improved affordability.”

“Activity is likely to pick up this fall, but increased inventory means more competition, and buyers will also be subject to budget constraints,” said Rob Morgan, principal investment analyst at Charles Stanley.

“While wages are rising, post-COVID cost of living pressures have not eased dramatically, and debt costs continue to rise for groups of homeowners refinancing their mortgages.”

“Furthermore, the prospects for further significant declines in interest rates depend on inflation coming under more sustained control, which is by no means a given.

“With ultra-low interest rates becoming a distant memory and a regime of around 4% bank rate over the medium term, the UK housing market is most likely to enter a period of stagnation as house prices gradually rise.”

Positive emotions

Despite the fall in house prices, most commentators seemed optimistic about market conditions in August after the Bank of England cut interest rates by 0.25 percentage points to 5.0% at the start of the month.

“Even though it was August, the market responded immediately to the slight drop in interest rates,” said Amy Reynolds, sales director at Richmond real estate firm Antony Roberts. “It was a very successful month with many transactions at all price ranges during a time that estate agents would normally lament as being quiet.”

“The interest rate cuts were widely expected so we were prepared, encouraging sellers to reduce their prices or put their properties on the market at the end of July or early August rather than waiting until September as most people would normally choose.”

Tomer Aboudi, director at specialist lender MT Finance, said: “The fears and uncertainties that existed before the elections evaporated in August as interest rate cuts improved sentiment in the property market.”

“High borrowing costs have been an issue for some time, but with lenders cutting mortgage rates and the Bank of England promising further cuts in the future, activity should pick up in the autumn.”

“While we are concerned about what the Budget will bring, the Chancellor has an opportunity to undertake stamp duty reform to support buyers and boost vital transaction levels. Let’s hope she seizes this opportunity to deliver benefits not just for the housing market but for the wider economy.”

Jeremy Leaf, a north London estate agent and former RICS housing chairman, said: “On the ground, activity remains stronger than a few months ago, particularly with greater political certainty.

“Confidence remains somewhat fragile despite the fall in base interest rates and inflation and is unlikely to be improved by the Chancellor’s recent announcement that a painful budget is expected at the end of October.”

“Nationwide’s figures are of course based solely on the purchasing activity of their own customers, but they have proven to be a reliable indicator of market activity over the years. Their figures on energy efficiency are interesting, but this has not yet been reflected in purchasing activity and is unlikely to be so unless energy prices rise significantly.”