Why have average asking prices fallen this month?

There are lots of headlines about house prices in the news, and if they’re likely to fall this year.

Our monthly House Price Index is a report based on the largest and most up-to-date number of homes currently for sale, so we’re able to identify any changes to the housing market in real time. It gives a picture of what’s happening at a national scale, and at a regional level.

Since June, some new home-sellers have been adjusting their asking price expectations as buyers have been facing mortgage and interest rate rises.

As a result, the average asking price of a home in Great Britain has fallen in the past two months, by £82 in June and by £905 in July.

This month, average asking prices dropped by £7,012 to £364,895. This is the biggest fall in August since 2018, as summer home-sellers look to attract buyers while inflation, and the Bank of England’s Base Rate, remain high.

Our property expert Tim Bannister says: “While a £7,012 drop in just one month seems dramatic, it’s in part an expected seasonal drop as sellers coming to market realise that they have to compromise on price due to the traditionally quieter summer holiday period.

Average asking prices are now £8,000 lower than at their peak in May. But there has been significant price growth over the past four years, so to put this month’s price fall into context, average asking prices are still £59,000 (19%) higher than they were in August 2019, before the Covid pandemic began.

You can read our August House Price Index in full here.

What does this mean if you’re looking to buy a home?

If you’re looking to buy and you’re saving for a deposit, or need to budget for higher mortgage costs, then any drop in average asking prices will be welcome news.

Current mortgage rates are starting to show tentative signs of improvement. The average five-year fixed mortgage rate is now 5.79%, down from 6.10% this time just four weeks ago.

You’re also likely to find more homes available for sale in your area now, compared to the busy housing market during the pandemic. But the number of available homes is still lower than during the more normal housing market at this time in 2019, and homes are still selling faster. The average time to find a buyer now is 55 days, compared to 61 days in 2019.

Tim says: “Estate agents are reporting that homes in many areas which are priced right from the outset are still attracting multiple prospective buyers competing to secure them, so if buyers see a home that could be for them and they can afford it, they may still need to act fast rather than sitting back,” he adds.

And if you’re thinking of selling?

The number of sales being agreed is now 15% lower than at this time in 2019, as higher mortgage rates mean that some buyers have had to pause their moving plans for now. But for those who can, moving or buying a first home remains an attractive option for those who can afford it, with the alternative being an extremely frenzied rental market, where rents are at record levels.

The much larger than usual price drop this month indicates that some sellers are pricing competitively for their current local market conditions, in order to attract a buyer.

Tim says: “Homes that are priced right the first time, rather than priced too high only to be reduced later, are not only more likely to find a buyer, but more likely to find a buyer quickly. This supports local estate agent reports of a two-speed market, with some properties for sale being overpriced and at risk of going stale, and many competitively priced homes which are attracting multiple prospective buyers.”

Looking at the homes that have successfully found a buyer, properties that are priced right from the outset find a buyer on average in 27 days, less than half the 66 days that it takes if the asking price is reduced after it has come to market.

READ MORE: What are the current UK mortgage rates?

The header image of this article is provided courtesy of Brand Vaughan, Brighton Kemptown