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UK average house price falls for the first time in a year to £293,221

house price A view of terraced housing in Shepherd's Bush, London. Picture date: Thursday August 5, 2021.
The price tag of a detached house jumped by £60,860 over the last year, a 15.1% climb. Photo: PA

The average house price in the UK has dropped for the first time since June 2021 to £293,221.

The 0.1% drop means that property prices are down just £365 from June’s record high. Still, house prices remain more than £30,000 higher than this time last year, according to Halifax’s house price index.

Across the UK, the annual rate of price growth slowed to 11.8% in July, down from 12.5% in June.

Bigger houses are outpacing smaller homes when it comes to price increases, with the price tag of a detached house jumping by £60,860 over the last year, a 15.1% climb. Flat prices rose £11,962, a 7.7% increase over the same period.

Read more: Interest rates: First-time buyers face paying 40% of salary in mortgage payments

“While we shouldn't read too much into any single month, especially as the fall is only fractional, a slowdown in annual house price growth has been expected for some time. 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,” Russell Galley, managing director at Halifax, said.

“Looking ahead, house prices are likely to come under more pressure as those market tailwinds fade further and the headwinds of rising interest rates and increased living costs take a firmer hold. Therefore a slowing of annual house price inflation still seems the most likely scenario,” he added.

Regionally, Wales is once again the number one spot for annual house price inflation, up by 14.7%. The average price of a house in Wales now stands at £222,639.

The south west of England also continues to experience a strong rate of growth, as prices shot up 14.3%. You now need on average £310,846 to buy a house here.

Read more: How Bank of England’s interest rate rise will affect mortgages and house prices

Scotland saw a slight slowdown in the rate of annual house price inflation, to 9.6% from the previous 9.9%. A Scottish home now costs an average of £203,677, another record high for the nation.

London continues to record slower annual house price inflation than the other UK regions. However, the rate of 7.9% is the highest in almost five years.

With an average property now costing £551,777 the capital’s already record average house price continues to push higher, up by £40,361 over the last year. It remains the most expensive place in the UK to buy a home.

"Mortgage approvals also fell by more than expected in June to 63,700 from 65,700 in May — perhaps the clearest sign that momentum in the market is slowing," Alice Haine, personal finance analyst at Bestinvest, said.

“With real incomes being eroded by runaway price rises, there is considerable uncertainty ahead for households across the country and that must mean the property market is finally going to fall in line with the rest of the economy.

“How well the market holds up during the coming recession will depend on how much homeowners have adjusted their finances to account for rising mortgage rates. With most mortgage holders on fixed-rate deals, the timing of when those deals expire will become key going forward. With rates set to go even higher this year, lock in new deals now to protect your finances while you still can,” she added.

Nathan Emerson, CEO of Propertymark, expects prices to stay where they are for the foreseeable future.

“The market remains competitive for buyers, but the dynamic is changing. The effect of the wider economic climate on buyer confidence is starting to show through with our member agents reporting fewer viewings and buyers negotiating harder," he said.

“That anecdotal evidence is reflected in our housing market report which shows a rise in the number of sales being agreed at below the asking price, up 7% year-on-year and 4% month-on-month, while sales at asking price remain stable.

“We expect prices to stay roughly where they are for some time and that’s because the number of houses coming the market is fairly static and interest rates still at a historically low level despite the recent rises,” he added.

Watch: Will UK house prices ever fall?