UK housing prices
(Source: Halifax)

UK house prices decline amid rising borrowing costs and high inflation


Property prices in the United Kingdom dropped by 4.6% in August on an annual basis, the biggest year-on-year decrease since 2009, as rising mortgage rates and high inflation continue to weigh on housing affordability and demand.

On a monthly basis, housing prices declined 1.9%, reaching a record average price of £279,569, according to Halifax’s monthly House Price Index report published on Thursday (Sept.7).

Compared to the previous trimester, house prices fell by 1.2% in the quarter to August.

All UK nations and the nine English regions registered a decline in house prices over the last year, with northern locations generally proving to be more resilient than areas in the south. Buyers faced with the need to find larger deposits and fund bigger monthly repayments means the South East is experiencing the biggest drop.

House prices have fallen by -5.0% on an annual basis (average house price of £379,565). Wales, which recorded some of the biggest gains in property prices during the pandemic-driven race for space, has seen property prices fall by -4.7% over the last year (average house price of £212,967). In Northern Ireland property prices have fallen by -1.5% annually (average house price of £182,700). In Scotland property prices fell by just -0.6% over the last year, the slowest pace of decline in the UK (average house price of £201,932).

London remains the most expensive place in the UK to purchase a home, with an average property price of £529,814. However with prices down by -4.1% over the last year, it has seen the biggest fall of any region in cash terms (-£22,777).

“We do expect further downward pressure on property prices through to the end of this year and into next, in line with previous forecasts. While any drop won’t be welcomed by current homeowners, it’s important to remember that prices remain some £40,000 (+17%) above pre-pandemic levels. It may also come as some relief to those looking to get onto the property ladder”Kim Kinnaird, director at Halifax Mortgages, said.