The average price of homes coming up for sale dropped by the largest monthly amount in more than 20 years in July, according to a property website, after the end of temporary cuts to stamp duty, and recent increases in council tax on second homes.
The average price being asked by new sellers fell by 1.2%, or £4,531, in July compared with a month earlier, to £373,709.
While there is usually a seasonal dip in house prices in July, at the start of the traditional summer holiday season, this month’s fall is the largest monthly price drop recorded by Rightmove since its index began in 2002.
Property price rises are also being constrained by the amount of properties up for sale, which has reached the highest level in a decade, the website found, adding that homeowners who want to sell during the summer have to work harder to attract potential buyers’ attention than during the spring.
“What’s most important to remember in this market is that the price is key to selling,” said Colleen Babcock, a property expert at Rightmove.
“The decade-high level of buyer choice means that discerning buyers can quickly spot when a home looks overpriced compared to the many others that may be available in their area.”
The highest number of falls in asking prices from new sellers was in London, where they dropped by 1.5% compared with a month earlier, and slid by 2.1% in inner London.
Temporary cuts to stamp duty in England and Northern Ireland came to an end at the start of April, after the announcement by the chancellor, Rachel Reeves, in her October budget. Scotland and Wales set their own taxes on house purchases.
The April stamp duty increase has had a greater impact in London, where property prices are higher, and the increase in stamp duty on second homes and properties bought as an investment is thought to be having an effect.
In the past, monthly price drops could have been viewed as a sign of a slower housing market, but the number of property sales is still growing year on year, and lower asking prices are helping to make house purchases more affordable for buyers.
Average asking prices from new sellers are only 0.1% higher than they were a year ago, at a time when lower mortgage rates are improving buyer affordability. Also helping is the fact that average wage rises are outstripping house prices and inflation.
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The number of property sales being agreed is 5% higher than at this time last year, while the number of potential buyers contacting estate agents about homes for sale is 6% higher than a year ago.
Rightmove has cut its forecast for this year’s increase in property prices, and is predicting they will rise by 2% rather than 4% over the course of 2025.
However, mortgage rates are continuing to fall, and investors are anticipating two further interest rate cuts by the Bank of England this year, meaning the outlook for the housing market in the second half of the year remains positive.
The average two-year fixed mortgage rate now stands at 4.53%, according to Rightmove’s mortgage tracker, compared with 5.34% a year ago, a saving of nearly £150 a month for a home bought for the average asking price of £373,709.