"Rising real incomes and improving sentiment suggest the market may be entering a period of gentle recovery"
- Rob Owens - e.surv
Affordability pressures across southern England, especially the South East, have restrained the housing market for some time, and a high stock of properties for sale has contributed to recent price declines. However, lower interest rates expected in the second half of the year should support buyers and improve market fundamentals, according to the latest analysis from e.surv.
July
Average house price: £353,279
Monthly change: -0.6%
Annual change: -2.2%
The unusual patterns in monthly property transactions caused by previous stamp duty changes are now unwinding. HMRC figures for June, the latest available, show further improvement in activity. Although sales have begun to pick up, the large number of vendors entering the market has caused prices to soften in recent months.
According to Acadata data, the average home price in England and Wales fell by 0.6% in July, marking the sixth month of declines. At £353,300, prices are 2.2% lower than a year earlier, reflecting one of the softest markets in recent times.
The Bank of England’s recent quarter-point base rate cut to 4%, with two more reductions expected this year, combined with some evidence of rising real incomes, especially for first-time buyers, provides reasons for cautious optimism for the second half. The latest RICS survey also indicated a flat market but showed some hope for a gentle recovery over the next three months.
Current prices largely reflect market conditions. Government interventions usually have a secondary impact, although sudden measures such as stamp duty holidays can quickly affect prices, activity, and sentiment. Without further interventions of this kind, other policy announcements related to homeownership may not directly boost activity but could reassure the market and consumers.
Housing may not be a top concern for the electorate overall, according to YouGov, but it matters significantly to younger voters, particularly those aged 18 to 24. The government is sensitive to this group, which has faced several challenges including the COVID-19 pandemic, student loan debt, uneven labour market prospects, and ongoing debates about working from home. All these issues intersect with housing and especially home ownership.
In many ways, the subdued market described here could signal a positive shift ahead. It suggests a breathing space where wages may start to rise relative to house prices, allowing affordability ratios to move closer to historic norms, a change driven by market forces rather than policy.
The regional picture mirrors the national slowdown, with year-on-year price growth cooling across all areas in June compared with three months earlier.
However, northern regions such as Yorkshire and the Humber and the North East remain exceptions, with prices slightly higher than a year ago. Southern England continues to lag behind, with the South East now surpassing London as the main drag on prices. Only around a quarter of areas in the South East show price increases compared with last year, highlighting ongoing affordability challenges in higher-priced markets.
“House prices in England and Wales fell by 0.6% in July, marking the sixth consecutive monthly decline," comments Rob Owens, head of research at e.surv, "At £353,300, average prices are now 2.2% lower than a year ago, reflecting a market still adjusting to earlier stamp duty changes and a surge in vendor listings. While activity remains subdued, HMRC data for June shows signs of recovery in transaction volumes."
Rob added, “The base rate cut to 4.0% may offer some relief to borrowers, particularly first-time buyers, but we don’t expect a significant change in mortgage rates in the short term. Lender caution and broader market conditions continue to weigh on affordability, especially in higher-priced regions like the South East and London.
“Nonetheless, rising real incomes and improving sentiment suggest the market may be entering a period of gentle recovery. With further rate cuts expected and no major policy interventions on the horizon, the second half of the year could offer a more stable footing.”
