Halifax House Price Index: House price drop may be a canary in the coal mine

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, comments on the publication of the Halifax House Price Index, showing house price drop may be a canary in the coal mine.

Key points from publication:
  • In July, average house prices were up 11.8% in  year – but they fell back 0.1% in a month. It’s the first monthly fall since June last year.
  • The cost of homes for first-time buyers was up 10.7% in July – it had been 12.4% in June.
  • Detached houses were up 15.1% in a year while flats were up 7.7%.
Sarah Coles says:

“House prices fell for the first time in over a year, and this was before we felt the impact of this week’s interest rate hike. July’s house price weakness could be a canary in the coal mine: an early sign of more worrying changes ahead.

“This is a clear indication that the market is cooling, and it’s not the only one. Mortgage approvals fell again in June, and are below their pre-pandemic levels. Approvals are a good measure of our enthusiasm for buying over the coming months, so we can expect demand to fall back. HMRC figures, meanwhile, show that sales had already fallen in June – making it the slowest June in nine years – so the market is increasingly sluggish.

“Meanwhile, higher interest rates are only going to make life harder. While the vast majority of those with a mortgage have fixed their rate, and are protected for the time-being, buyers with new mortgages are facing significantly higher costs. At a time when they’re feeling the pinch from all sides, it could make life too uncomfortable, and force more of them to put a purchase on hold.

“All the talk about a coming recession isn’t going to do their confidence any favours either. Unemployment figures always lag by several months, but the Purchasing Manager’s Index demonstrates that business decision-makers are far less enthusiastic about the economic outlook. Strong employment figures have been key to the booming property market, so any weakness could seriously dent house prices.

“However, we shouldn’t lose sight of the fact that annual house price rises are still in double-digits, so we’re paying £30,000 more on average for a home than we were this time last year. The level of demand has now dropped back, and according to Rightmove, more properties are coming up for sale – but there’s still a massive imbalance of supply and demand, which is keeping prices elevated. 

“Eventually the reality of rising prices will take its toll on confidence and cool the market. July’s small price drop may be the first sign of what is to come, but there’s likely to be some life in the property market yet.”


Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay