House prices in the UK fell in August for the first time this year, mostly due to a drop in demand for larger homes as the cut to stamp duty continued to unwind.
Property website Rightmove PLC (LSE:RMV) (LSE:RMV) said that asking prices between July 11 and August 7 fell by around 0.3% in its survey in August, weighed down by a 0.8% decline in houses of four bedrooms or more. The slip also marked a reversal from a 0.7% increase in the previous survey in early July.
Despite the small drop, Rightmove said buyer demand “remains strong”, which suggested that a bounce in prices and seller activity could occur in the autumn, highlighting that demand in the first week of August was 56% higher than the same period in 2019.
“New sellers dropping their asking prices can ring economy alarm bells, especially when it’s the first time so far this year, so it’s important to dig underneath the headline figures. Firstly, we are in the holiday season which means that sellers have traditionally tempted distracted buyers with lower prices, though that might well be less applicable this year with many buyers having to stay a lot closer to home. Indeed, our analysis shows that average prices have only fallen in the upper-end sector, which is usually more affected by seasonal factors such as the summer holidays and has also seen the greatest withdrawal of stamp duty incentives,” Rightmove’s director of property data Tim Bannister said in a statement.
“The mass-market of properties that cater for first-time buyers and second-steppers is still seeing high demand and upwards price pressure leading to new record high average prices in those sectors. In England there remains a smaller stamp duty saving of up to GBP2,500, though the window to take advantage of this saving by buying now and completing by the end of September is pretty much closed,” he added.
The slow decline in prices will provide further evidence that the booming housing market is finally starting to feel the effects of the end of the stamp duty holiday, which was introduced by Chancellor of the Exchequer Rishi Sunak last July in a bid to boost the wider economy out of its pandemic slump. However, the policy has attracted criticism from many, who have accused the Treasury of helping inflate house prices further and price younger buyers out of the market.