While house prices are forecast to end this year 2.5% higher than at the start, the pace at which values have risen has slowed in the past year.

House price inflation has decreased to just 0.5% in the past 12 months, according to Zoopla.

And one in five homes had the asking price reduced by 5% or more in August to attract greater buyer interest, it said.

The 0.5% drop includes price falls during the end of 2023 – one of only three quarters during the past decade in which values have dropped.

As well as in the final three months of last year, they also dropped during the third quarter of that year, along with the final quarter of 2022.

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Falling mortgage rates boost property market

Despite the drop in the past 12 months, the average house price in the UK has risen by 1.4% in the seven months to July 2024.

This improvement is being seen across many areas of the country, with falling mortgage rates helping to reinvigorate the property market.

Northern Ireland has experienced the biggest increase, with the rate of growth up 5.1%.

By contrast, it has dropped 0.9% in the East of England, while in London it has turned positive, rising 0.2%.

In the South East, price inflation has seen a fall of 0.7%. In the South West, it is 0.6%, and in the East Midlands, it is 0.1%.

 

Warnings from the Prime Minister

However, the news comes alongside warnings from the Prime Minister this week about the country needing to accept “short-term pain” for “long-term good”.

Starmer warned that the Autumn Budget, which will be delivered by the new Chancellor Rachel Reeves, will be “painful”.

He added that “those with the broadest shoulders should bear the heavier burden”, after previously pledging to avoid hiking taxes.

Starmer is expected to raise taxes in several areas, including capital gains tax (CGT), prompting landlords to fear they may have to sell their property to avoid losing money.

Before the Prime Minister’s statement, the supply of properties for sale had already increased, with the average estate agent having 33 homes for sale, according to Zoopla.

It is the highest level since 2017, marking a seven-year high.

Zoopla explained that many of these sellers are also buyers, which is why sales are up 23% year-on-year.

It said greater choice for buyers would help to keep house price inflation in check during 2024 and into 2025.

 

Buyers still adjusting to higher mortgage rates

While mortgage rates are down from their recent peak, current levels may still come as a shock to buyers coming to the end of their longer-term cheaper deals.

House prices continue to register small falls on both a quarterly and annual basis in some postcodes.

These include Taunton, which is down 2%, as well as Dartford, which is down 1.3%, Enfield, which is down 1.1%, and Harrogate, which is down 1%, based on year-on-year price changes.

House prices are rising faster than the national average in lower-value and more affordable housing markets, often with proximity to larger cities in England.

These include Wolverhampton, which is up 3%, Oldham, which is up 2.8%, and Wakefield, which is up 2.7%.

House prices are rising even faster across the Scottish Borders from Dumfries and Galloway, which is up 4.4%, to Galashiels, which is up 3.1%, as well as in Falkirk, which is up 3.1%, to the North and East of Glasgow.

 

Homes with price cuts take twice as long to sell

Zoopla said sellers must “remain realistic on pricing”, especially if they are serious about moving home.

Buyers remain price-sensitive as their purchasing power has been eroded by higher mortgage rates.

This is slowly being offset by faster income growth, but there is further to go to fully repair affordability.

This explains why one in five homes had the asking price reduced by 5% or more in August to attract greater buyer interest.

Homes that need an asking price cut take more than twice as long to sell as homes without a price reduction.

Zoopla said it takes around a month – 28 days – to agree a sale where there has been no asking price reduction.

Sales take more than two months – 73 days – where the asking price has been cut by at least 5% to attract demand.

A higher proportion of homes with at least a 5% asking price cut don’t sell at all.

 

Reducing the asking price at the outset

Zoopla warned that as more sellers come to the market, with more expected upon entering the post-holiday autumn market, getting the asking price right at the outset is essential to allow serious sellers to secure a timely sale.

Richard Donnell, executive director at Zoopla, said: “Momentum in the sales market continues to build as mortgage rates drift lower and more and more sellers gain the confidence to list their home for sale.

“Buyers have much greater choice, which will support sales numbers, but this will keep prices rises in check.

“Buyers have less purchasing power than two to three years ago and remain price-sensitive, meaning sellers can’t afford to get ahead of themselves on where to set the right price for their home.

“If you need to cut the asking price by 5% or more, then your home will take twice as long to sell or may not sell at all”.

 

Building more homes

Nathan Emerson, chief executive of Propertymark, remained positive about the property market and insisted that more homes needed to be built.

He said: “There is a real positivity within the housing market now that the economy seems to have stabilised.

“This is the UK government’s chance to take advantage of current market confidence by clarifying a more precise time frame for enacting the Planning and Infrastructure Bill.

“This will build the homes desperately needed in order to keep up with ever-growing demand and start to form a plan of action if the government wants to meet its target of building nearly two million new homes across the next parliamentary term.”