House prices fell last month for the first time since January in a sign that the overheating UK housing market is finally starting to cool, according to lender Halifax.
Month-on-month, the price of the average home slipped by 0.5% in June to £260,358, a drop of £1,284 from £261,642 in May’s average.
But on an annual basis, Halifax said property prices were still 8.8%, or about £21,000, higher than they were a year ago, with the strongest growth in Wales, Northern Ireland and north-west England.
Last week, rival lender Nationwide said its house price data showed a 13.4% jump in prices over the previous 12 months – the biggest rise in more than 16 years.
Halifax’s dip in prices coincided with June’s end of the full stamp duty holiday, which had removed the purchase tax on properties worth up to £500,000. The tax-free threshold fell to £250,000 this month and will revert to the original level, £125,000, in September, although there is still help for first-time buyers.
During the stamp duty holiday, prospective buyers have faced soaring property prices, with homes in sought-after areas being chased by multiple buyers. Bidding wars and gazumping became commonplace.
Russell Galley, Halifax’s managing director, said Covid-related demand had played its part.
“Government support measures over the last year have helped to boost demand, particularly among buyers searching for larger family homes at the upper end of the market. Indeed, the average price of a detached home has risen faster than any other property type over the past 12 months, up by more than 10% or almost £47,000 in cash terms.
“At a cost of over half a million pounds, they are now £200,000 more expensive than the typical semi-detached house. That power of home movers to drive the market, as people look to find properties with more space, spurred on by increased time spent at home during the pandemic, won’t fade entirely as the economy recovers.
“Coupled with buyers chasing the relatively small number of available properties, and continued low borrowing rates, it’s a trend which can sustain high average prices for some time to come.”
Galley said Wales registered its strongest performance since April 2005, with prices up 12%. In Northern Ireland and the north-west of England, house prices rose by 11.5% in the past year, while in Yorkshire and Humberside and Scotland, prices grew 10.9% and 10.4% respectively.
At the other end of the scale, the south of England continues to lag somewhat, with eastern England and the south-east recording growth rates of about 7%, Halifax said.
Lucy Pendleton, of the independent estate agents James Pendleton, said this slight cooling did not mean prices would come crashing back down to where they were last summer.
“Property supply is still failing to keep up with demand, with some buyers holding off marketing their property because they cannot see anywhere to move to, creating a vicious cycle of low supply and consequently causing intense up-bidding on the most desirable properties.”
Anna Clare Harper, the chief executive of property consultancy SPI Capital, said: “The tapering down of the temporary stamp duty reduction takes the pressure off demand.
“However, supply is still constrained, construction is getting harder and more expensive, and a mass sell-off from property owners is unlikely in the absence of significant interest rate rises.”