UK house prices fall by more than expected amid economic uncertainty

UK house prices suffered a steeper than expected fall last month and the biggest quarterly drop in value in almost a year, as economic uncertainty continued to affect the property market.

The average property price fell by 0.4% month on month in May to £296,648, a much steeper fall than the 0.1% decline City economists had expected.

Figures published by Halifax on Friday showed that the cost of a typical UK property has fallen in three of the past four months, with the drop in May following a 0.3% rise in April.

The unexpectedly large fall last month pushed the quarterly change in house prices down 0.3%, the steepest fall since June last year.

It also fuelled a significant slowdown in the annual rate of growth to 2.5% – falling short of forecasts of just under 3% and easing from growth of 3.2% in April – representing the slowest growth since July last year.

Amanda Bryden, the head of mortgages at Halifax, said the figures showed that the housing market had now absorbed the rush of activity as buyers tried to complete purchases before stamp duty increases in England and Northern Ireland in April.

“Despite ongoing pressure on household finances and a still uncertain economic backdrop, the housing market has shown resilience,” she said. “The outlook will depend on the pace of cuts to interest rates, as well as the strength of future income growth and broader inflation trends.”

However, the number of mortgage approvals for new home purchases – which is an indicator of future borrowing and is seen by many as a better measure of the housing market’s health – fell for a third consecutive month in April.

According to the most recent data from the Bank of England, net residential mortgage approvals declined by 3,100 to 60,500, below economists’ expectations.

HM Revenue and Customs figures published last week showed an estimated 64,680 house sales took place in April, 64% lower than the 177,440 reported in March.

Jeremy Leaf, a London-based estate agent, said: “The significant number of purchases brought forward to take advantage of the stamp duty holiday ending in March is still having a negative impact on activity now.

“Most of the stock made available at that time, if not sold or under offer, is still available so the inevitable result is a softening in prices. However, sales are still proceeding where buyers and sellers are most realistic.”