House prices see biggest July drop in over 20 years

Key takeaways from July’s House Price Index:

• The average asking price of a home has dropped by 1.2% this month, to £373,709
• This is the largest July price drop in over 20 years
• London has seen the biggest regional price fall (-1.5%), driven by Inner London in particular (-2.1%)
• Despite the price drop, buyer activity remains strong, with sales agreed 5% higher than at this time last year

Following record-breaking house prices seen in the Spring, average asking prices have fallen by 1.2% in July (-£4,531). While there’s usually a seasonal dip in prices at this time of year, this is the largest monthly summer price drop in over 20 years we’ve been analysing house price data. So, what’s the reason for this fall?

There’s a high number of homes listed for homes right now, meaning many sellers are coming to market with an asking price that’s attractive to buyers – to try and make their homes stand out from the crowd. With more choice for buyers than there has been over the past 10 years, sellers are having to price even more competitively. At the same time, we’re seeing the start of the traditional summer holiday season, when people’s attention turns to summer holidays over house hunting, and sellers typically need to work harder to capture attention.

Our property expert, Colleen Babcock, says: “We’re seeing an interesting dynamic between pricing and activity levels right now. The healthy and improving level of property sales being agreed shows us that there are motivated buyers out there who are willing to finalise a deal for the right property. What’s most important to remember in this market is that the price is key to selling. The decade-high level of buyer choice means that discerning buyers can quickly spot when a home looks over-priced compared to the many others that may be available in their area.”

So, while July’s price drop may feel dramatic, it’s actually a sign that sellers are responding to market conditions with competitive pricing – and it’s working. The number of sales agreed is 5% higher than at this time last year, and the number of buyers contacting estate agent about homes for sale is 6% higher.

What’s happening across Great Britain?

The biggest price drops have come from London, which has seen a 1.5% monthly fall, led by Inner London at -2.1%. April’s increase in residential stamp duty in England has had a greater impact in the capital where property prices are higher, while last year’s increase in stamp duty for investment and second homes is also having an effect. In addition, changes to non-dom tax rules and uncertainty around future tax changes may be affecting investment into the central London market.

However, the rest of Great Britain represents around 90% of the housing market, and the picture there is more mixed. The North East, which is the least expensive region, has actually seen a 1.2% increase in prices this month, which is continuing the trend of cheaper areas seeing faster price growth.

Colleen adds: “It’s been a promising first half of the year for activity levels, particularly when you consider that some will have brought their plans forward to try to avoid added stamp duty from April. Even after the stamp duty deadline, we’re seeing more sales being agreed and more new potential buyers entering the market than at the same time last year.”

Is now a good time to move?

For buyers, the current market conditions are providing buyers with more room for negotiation than we’ve seen in recent years. Average asking prices are now just 0.1% higher than they were a year ago, while average earnings are up by over 5%.

For sellers, it’s all about realistic and competitive pricing from the start. Our data shows that pricing is key to selling in this high-competition market, and sellers who are over-optimistic on their initial asking price are likely to find they’ll need to make a reduction later.

The combination of competitive pricing from sellers, improved mortgage rates and strong buyer activity suggests that motivated movers on both sides are pressing ahead with their home moves. We’ve lowered our price prediction for 2025 from +4% to +2%, to reflect how the high number of homes for sale will likely continue to mute price growth through the remainder of the year. We still forecast we’re likely to end the year with around 1.15 million transactions having taken place in 2025.

What do the local experts think?

Phillip Bishop, Managing Director at Perry Bishop in Cirencester, says: “Buyer activity levels remain strong since the April 2025 Stamp Duty changes. However, there is significant property choice and availability for buyers, which is allowing them to be uncompromising on their criteria and expectations. We’re seeing significantly higher stock levels than a year ago but mitigated in part by a good increase in buyer registrations and viewing levels compared with last year. The serious and motivated sellers are pricing sensibly and getting success.”

Thinking of making a move soon?

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The header image was provided courtesy of Hudson Moody, York City Centre