UK house prices fall as property market cools

The average UK house price was £256,000 ($353,946) in July, which is £19,000 higher than this time last year, but down from a record high of £265,000 in June 2021.

As per the latest data from the Office for National Statistics (ONS), the UK’s average house prices increased by 8% year-on-year in July 2021, but were down from 13.1% a month prior.

"Before we run for the hills at the first sight of a house price decline it’s important to note that the market has been moving at a record pace for a sustained period of time and so a pause for breath is more than natural," said CEO of GetAgent.co.uk, Colby Short.

"We know the stamp duty holiday has had an incredible impact and so a monthly decline following both deadlines is to be expected," he said.

"Market sentiment is still extremely high and while mortgage affordability remains at record lows, the housing market will continue to blossom well into autumn and beyond,” Short added.

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Tax breaks introduced by the government due to the pandemic, including the stamp duty holiday, were originally due to conclude at the end of March 2021. It is likely that March’s average house prices were slightly inflated as buyers rushed to ensure their house purchases were scheduled to complete ahead of this deadline.

This effect was then further exaggerated in June 2021, in line with the extension to the tax breaks.

“The growth in house prices slowed substantially across all nations and regions, after the stamp duty holiday on more expensive properties came to an end, with the number of transactions also at historically low levels,” said ONS head of economic statistics, Sam Beckett.

Average house prices increased 7% over the year in England to £271,000, in Wales prices were up 11.6% to £188,000, in Scotland to £177,000 (14.6%), and in Northern Ireland to £153,000 (9%).

The lowest annual growth was in London, where average prices increased by 2.2% over the year to July 2021, down from 5.1% in June 2021.

Read more: UK rents hit decade-high as London lags

But London’s average house prices still remain the most expensive of any region in the UK — at an average of £495,000 in July 2021.

The North East continued to have the lowest average house price, at £145,000, having surpassed its pre-economic downturn peak of July 2007 in December 2020.

"Today’s figures bring into focus just how difficult it is going to be for future generations to buy a home," said Colin Bell, COO at mortgage provider Perenna,

“House price growth has reached double figures several times already this year and it’s clear to see that something needs to change if younger people are ever going to be able to step onto the property ladder and homebuyers be able to trade up as their needs change.”

He called for “a new common-sense approach” to mortgage lending which includes long-term fixed rate mortgages.

Read more: UK property listings fall as market cools

This will solve affordability issues faced by homebuyers because they allow people to borrow more, while also providing complete protection from future interest rate increases, he said.

“This helps to keep deposit requirements to a minimum, does away with the stress testing required to ensure borrowers can afford the mortgage if interest rates rise and also means borrowers don’t have to remortgage unless they have found a better rate not when their short term fixed rate ends.”

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