Fall in UK house prices 'should be taken with a pinch of salt'

A fall in house prices in July 2022 should be taken with a pinch of salt, a contractor mortgage brokerage today warns ContractorUK readers.

Freelancer Financials, which specialises in mortgages for contractors, sounded the cautionary note this morning, following the Halifax recording the first property price dip in 13 months.

The limited company-friendly lender found that average house prices fell between June and July by 0.1%, while the annual rate of price growth over the same period eased from 12.5% to 11.8%.

The first of its kind since June 2021, the 0.1% fall takes the average property price tag to £293,221, down £365 on the previous month’s record-high, Halifax said.

'Stimulated'

But it is probably unfair to compare today’s house prices with 2021’s -- when the stamp duty holiday “stimulated the market,” according to Freelancer Financials’ John Yerou.

“Plus, there is usually a seasonal drop-off in the summer months of July and August,” continued Mr Yerou, the brokerage’s chief executive.

“This fall in prices is only fractional …[and] comparing 2022 with pre-pandemic levels, in 2019, demand is still up.”

Similarly, despite the fall of just 0.1% on a monthly basis, house prices remain more than £30,000 higher than this time last year, observed Halifax’s managing director Russell Galley.

'Bigger houses, biggest price gains'

The lender signalled that contractors looking to move up the property ladder will probably benefit the least from the tiny price fall, because the gains in the values of larger homes are still strong.

Price gains for “bigger houses” even outpaced those for smaller homes in July, with the price of a detached property inflating by £60, 860 (+15.1%), versus £11,962 (+7.7%) for flats.

“Although this fall in house prices seems to indicate that the housing market is cooling off… [it[ should be taken with a pinch of salt,” cautioned Freelancer Financials’ Mr Yerou.

'Drivers of buoyancy remain'

“We shouldn't read too much into any single month”, agreed Mr Galley of Halifax.

“Leading indicators of the housing market have recently shown a softening of activity, while rising borrowing costs are adding to the squeeze on household budgets against a backdrop of exceptionally high house price-to-income ratios.”

Galley added that some of the “drivers of the buoyant market” of late, such as extra funds saved during the coronavirus pandemic and changes to how people use their homes, remain.

However Halifax says the “extremely short supply” of homes for sale is serving to “underpin” property prices at a high level.

'Negotiating power gradually shifting'

At Freelancer Financials, Mr Yerou shared his outlook with ContractorUK: “Several indicators point to activity in the market continuing to cool from the lofty heights of the last two years.

“It is likely that the impact of interest rate rises will gradually trickle through, but right now they’re not having a serious impact on the property market. Yes, demand has lightened a fraction and negotiating power is gradually shifting to buyers, but until the imbalance in affordable properties is addressed, house prices will remain stable.”