House prices see first annual drop since 2023

House prices have fallen year-on-year for the first time since November 2023, according to the latest Lloyds house price index.

Average values were 0.4% lower in August than a year earlier, while prices also slipped by 0.2% during the month.

The average property price now stands at £298,468, down from £299,153 in July.

August’s decline followed a 0.1% monthly fall in July as fewer homes changed hands.

Housing market slows

The lender’s mortgages director, Andrew Asaam, said: “The housing market has faced a more difficult backdrop in recent months, with the impact of global events on inflation and borrowing costs creating greater economic uncertainty.

“What we’re not seeing is a rush of homeowners cutting prices.

“But more are choosing to sit tight, with sellers reluctant to accept offers they feel are too low, while some buyers are waiting to see how conditions develop.”

He added: “As a result, fewer homes are changing hands, with latest industry figures showing mortgage approvals now at their lowest level since the start of 2024.

“It’s also important to keep recent price movements in perspective.

“Average house prices remain around 25% higher than they were at the end of 2019, despite the substantial increase to interest rates seen over recent years.”

Regional prices diverge

Northern Ireland continued to record the strongest annual growth, with prices rising 6.9% to an average of £231,245, an all-time high.

Scotland saw values increase by 3.5% over the year to £223,437, while prices in Wales rose by 0.6% to £230,282.

In England, the North East recorded annual growth of 2.7%, taking the average property price to £184,370.

The North West followed with prices up 2% year-on-year to £248,675.

Southern England falls

The South East recorded the largest annual decline, with prices falling 1.6% to an average of £381,729.

Greater London prices were down 1.5% over the year to £534,177.

The South West saw values fall by 1.2% to £298,807.

Eastern England also recorded a 1.2% annual decline, taking the average property price to £331,410.

Property sector reaction to the Lloyds house price index

Jonathan Hopper, the CEO of Garrington Property Finders, said: “A summer slowdown is normal, a slide is not. Summer 2026 has seen both.

“Estate agents are used to the phones going quiet during July and August, but this year saw a fall in both transactions and prices.”

Tom Bill, the head of UK residential research at Knight Frank, said: “We have seen a spring slump rather than a seasonal bounce this year as prices and transactions came under pressure from higher mortgage costs and an ever-present concern around which taxes the government may raise next.

“Falling house prices are a natural consequence of that and whether we see a seasonal autumn bounce will depend on the level of any pre-Budget speculation and how the unpredictable conflict in the Middle East unfolds and impacts on UK inflation expectations.”

Tomer Aboody, a founding director of specialist lender MT Finance, said: “A fall in average house prices in August comes as no surprise with the new prime minister already indicating further and harsher taxes to come for both homeowners and landlords.

“Trying to squeeze every house owner further isn’t the way to encourage the economy or help it flourish.”

Jeremy Leaf, a north London estate agent and a former RICS residential chairman, said: “We are seeing a bit of a stand-off between buyers who are nervous about making offers while worried about the effects of inflation on mortgage costs and sellers who believe they have reduced as much as they can.

“Therefore, prices overall in the fewer properties which are changing hands are not only softening but sales are taking longer.”

Ian Futcher, a financial planner at Quilter, said: “Stretched affordability and an uncertain economic background has had a negative impact on house prices and unfortunately recent volatility in bond markets has the potential to put further pressure on mortgage rates.

“Swap rates have risen sharply in recent days, and some lenders have already begun adjusting pricing in response.”