August saw the first house price drop of the year . . . what will happen next?

August saw the first house price drop of the year . . . what will happen next?

August is traditionally holiday month. Most people take time off, enjoy the sunshine and recharge their batteries; they don’t think very much about property.

This is probably the main reason why the market flags and house prices fall during August. The drop this year (of 1.3%) aligns with the trend over the last ten years and so it was not unexpected. Also, those sellers who have put a property on the market during August may well have Christmas in mind. Their asking price is a little lower so they can attract a buyer quickly because ensuring they can move into their new home before the winter festivities is important to them. This is all part of normal seasonal fluctuations.

But what will happen in September?

There will be some pressure from interest rate rises and from the cost of deposits, especially for first-time buyers. However — although this may deter some people from looking to buy a property — many more are likely to be incentivised to take action while they can secure a fixed-rate mortgage that they can afford, in case there are further interest rate rises over the coming months. It therefore seems likely that prices will pick up again, as they do every year.

The key reason for this optimism, however, is the supply and demand issue — more buyers chasing fewer properties.

Although buyer enquiries in August were down 4% on last year’s exceptional figures, they remained 20% higher than in 2019 and, crucially, there is now 39% less available housing stock than in 2019. This significant imbalance is keeping prices buoyant and doesn’t seem likely to change in the near future.

We believe that the rest of the year will continue to reflect the usual seasonal pattern. So, despite the growing uncertainty around the wider economy, interest rate rises and the potential for strains on household budgets, we are expecting to end the year with healthy growth of around 7% for 2022.

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