Average house prices in the three months to July were up 7.9% year-on-year, but remained the lowest since December 2014 (7.8%).
On a monthly basis, house prices fell by 0.6% between June and July; the first decline since February 2015 (-0.4%).
However mortgage approvals remain high. The volume of mortgage approvals for house purchases increased by 3% in June. Approvals in the three months to June were 8% higher than in the preceding three months (January-March) and 4% higher than in the same three months last year.
UK home sales also increased for the second consecutive month, rising by 5% between May and June to 104,590. This was the first time that monthly sales have exceeded 100,000 since September 2014. Sales were 3% higher than in June 2014; the first annual rise this year.
The stock of homes available for sale fell for the third successive month in June to another new record low. New instructions also dropped in June, marking the tenth decline in the past 11 months, contributing to the very low levels of supply.
Stephen Noakes, Managing Director Retail Customer Products, said: “House prices in the three months to July were 2.4% higher than in the previous quarter. This measure of the underlying rate of house price growth eased following last month’s sharp rise. Annual house price growth also declined, to 7.9% from 9.6% in June and is at its lowest since December 2014.
The underlying pace of house price growth remains robust notwithstanding the easing in July. Continuing economic recovery, earnings growth in excess of consumer price inflation and very low mortgage rates all underpin housing demand. Supply is highly restricted with the stock of homes available for sale falling further to new record lows. This combination of well-supported demand and tight supply is likely to ensure that house price growth remains relatively strong in the near-term.”
Stephen Smith, Director, Legal & General Mortgage Club & Housing, commented: “Although house price growth has shown a surprise fall this month, we don’t expect this trend to last. Strong market conditions, driven by low inflation and rising wages, along with the MPC’s recent hints of rate rises, are likely to drive more people to the market in the remainder of the year.
Supply is already failing to keep up with demand, and unless more homes are built to alleviate overcrowding in the market, increasing demand is likely to cause house prices to climb at a greater pace compared to recent months. This will make homes unaffordable for many looking to buy, meaning that they will be forced to wait until later in life to follow their dream of homeownership. The country needs to build around 250,000 extra houses per year to bring balance to the market, and make homes more affordable for those seeking to own their own home.”