The Office for National Statistics (ONS) house price index for the month also revealed a 0.6 per cent uptick in prices since last year.
This indicated a slowdown in house price rises as it compared to a 1.7 per cent annual increase and 0.7 per cent monthly rise in June.
Waning house price gains
It was noted that while house prices were still increasing annually, the rate was slowing and the possibility of a decline was becoming more apparent.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The property market is still clinging onto gains, but it’s losing its grip. We’re now seeing annual price falls in two regions, and this may well spread.”
Nathan Emerson, CEO of Propertymark, said it was no surprise to see the slowing in house price growth because they rose at an “unprecedented pace” last year.
He added: “This drop is needed and should not be seen as a negative as house prices remain up compared to what they were last year, and this slowing is playing a crucial part in combatting rising interest rates and improving homebuyers’ affordability.”
Jonathan Hopper, CEO of Garrington Property Finders, said: “The speed and scale of the downturn is now impossible to ignore. In the space of just 12 months, the annual pace of price rises has plunged from 13.8 per cent to just 0.6 per cent.
“It’s now only a matter of time before the index slips into negative territory, as on the property front line we’re regularly seeing homes sell for tens of thousands below asking price as proceedable buyers find themselves holding all the cards.”
Richard Harrison, head of mortgages at Atom Bank, said house prices were rising more slowly and this was “somewhat anticipated when you consider the sharp rise in borrowing costs customers have faced over the summer months, which has led to purchasing activity falling considerably below the levels seen last year.”
He added: “This is particularly true of London, which has seen house prices fall by 0.8 per cent annually as customers face greater affordability challenges in the capital. Most commentators expect prices to remain suppressed over the short-term, but do not expect to see double digit falls on the basis that employment levels perform as expected.”
Affordability still a challenge
Coles said not to “count on a boom” in the market, adding: “Property is still horribly expensive, mortgages are still eye-wateringly high, and we’re starting to see the first signs of weakness creep into the jobs market – which has been so vital in underpinning house prices during the cost of living crisis. It means we may need to wade through the gloom for a while longer, before we see light at the end of the tunnel.”
Arjan Verbeek, founder and CEO of Perenna, said: “While we’re seeing house price growth slow, it does not solve the underlying problem preventing many buyers from stepping onto the housing ladder. UK house prices are still significantly higher than the current income multiples offered by most high-street lenders, which average between four to five times more than an individual’s annual salary.”
Harrison said the recent falls in mortgage pricing could be favourable for potential buyers.
He added: “Looking more positively at the situation, moderately lower house prices coupled with ongoing growth in wages could improve affordability for prospective buyers. In addition, mortgage pricing has been falling during September and could continue with inflation dropping faster than expected. That being said, borrowers should still get used to higher rates, with the base rate expected to remain higher for longer.”
National and regional differences
In England, house prices increased 0.4 per cent to an average of £308,633 from June to July. This represented a 0.6 per cent annual rise.
The largest monthly increase in England was recorded in Yorkshire and the Humber, where prices went up by 1.5 per cent to £212,730. This was also a 2.5 per cent jump compared to last year.
The North East experienced the highest annual growth with a 2.7 per cent rise in house prices to £163,480. On a monthly basis, the change was smaller at an increase of 0.5 per cent.
The South West and London were the only regions to see a drop in average house prices, with falls of one per cent and 0.8 per cent to £323,713 and £534,265 respectively.
In Scotland, there was a 0.1 per cent annual rise in average house prices to £191,870, while compared to the previous month this was a 1.1 per cent increase.
Average house prices in Wales fell by 0.1 per cent year-on-year to £215,632, while this was also a 1.1 per cent rise compared to the month before.
In Northern Ireland, average house prices increased by 2.7 per cent annually, and 1.4 per cent monthly to £173,898.
Property types
In July, there was an annual fall in terraced houses and flats and maisonettes, as each property type experienced a 0.3 per cent and one per cent decline to averages of £236,520 and £229,931 respectively.
Detached homes recorded the largest annual increase of 2.2 per cent to £458,707.
Semi-detached homes saw a modest rise in average house prices to £281,520, which was one per cent higher than the year before.
