It’s bad news for homeowners as house prices drop for the first time this year

Is the bubble about to burst?

House prices have finally dipped for the first time in five months, coinciding with the stamp duty holiday starting to be phased out.

The housing market defied all expectations in the last year – rather than a post-lockdown house price crash – prices rocketed in an unprecedented year of gains. In May annual house price inflation had hit a 14-year high of 9.6 percent. However, house price inflation finally seems to show signs of easing back, as the latest June Halifax house price index revealed that annual house price inflation now stood at 8.8 per cent.

Russell Galley, Managing Director at Halifax explains that it is still only a moderate decrease. Average house prices are still more than £21,000 higher than last year. However, with the stamp duty holiday starting to be phased out, and coming to an end by the 1st October, the housing market looks to be starting to slow down.

house exterior with white walls and sash windows

(Image credit: Future PLC/ David Parmiter)

'With the stamp duty holiday now being phased out, it’s was predicted the market might start to lose some steam entering the latter half of the year,' explains Russell Galley.

'That power of home movers to drive the market, as people look to find properties with more space, spurred on by increased time spent at home during the pandemic, won’t fade entirely as the economy recovers,' he warns. 'Coupled with buyers chasing the relatively small number of available properties, and continued low borrowing rates, it’s a trend which can sustain high average prices for some time to come.'

'However, we would still expect annual growth to have slowed somewhat more by the end of the year, with unemployment expected to edge higher as job support measures unwind, and the peak of buyer demand now likely to have passed.'

room with yellow door grey armchair and laptop

(Image credit: Future PLC/ David Merewether)

The cooling of the housing market has been seen by estate agents too, Chestertons revealed that while buyer enquiries, viewing and revenue in June was still at record levels, the market was looking more balanced.

'We are now entering a more balanced market,' says Guy Gittins, CEO of Chestertons. 'As a result, demand is currently met by supply and in the first half of the year, Chestertons brought 46% more properties to the market compared to the same period last year. Due to the unusually high volume of properties available to buy, price inflation is likely to be kept at bay – at least until the end of the year.'

living room with grey sofa potted plants and floating shelf

(Image credit: Future PLC/ David Parmiter)

Government support measures such as the stamp duty holiday has helped to bolster the market over the year by boosting demand. According to the Halifax report, this has largely been amongst buyers searching for larger family homes at the higher end of the market.

The last 12 months have seen the average price of a detached home rocket by almost £47,000, rising faster than any other property type this year. They are now £200,000 more expensive than the average semi-detached house.

The stamp duty holiday has currently been extended until the end of September, but as it starts to wind down so should the flurry of market activity.

Rebecca Knight
Deputy Editor, Digital

Rebecca Knight has been the Deputy Editor on the Ideal Home Website since 2022. She graduated with a Masters degree in magazine journalism from City, University of London in 2018, before starting her journalism career as a staff writer on women's weekly magazines. She fell into the world of homes and interiors after joining the Ideal Home website team in 2019 as a Digital Writer. In 2020 she moved into position of Homes News Editor working across Homes & Gardens, LivingEtc, Real Homes, Gardeningetc and Ideal Home covering everything from the latest viral cleaning hack to the next big interior trend.