Why house prices are flatlining – and what it means for sellers and buyers

UK house price growth has ground to a halt, with the latest figures suggesting the property market is losing momentum once again. The average home was worth £299,253 in July, according to the Lloyds house price index, unchanged from June and leaving annual growth at just 0.1 per cent – the lowest level since November 2023. Higher mortgage rates, economic uncertainty and weaker buyer confidence are all combining to cool activity, experts say, although the situation varies significantly across the UK. While Northern Ireland and much of northern England continue to record stronger price growth, parts of southern England including London are seeing values fall. For buyers, a quieter market could create opportunities, but for sellers, it means pricing correctly and being realistic has rarely been more important. Here The i Paper explains what’s happening to house prices, why the market is stalling, and what buyers and sellers need to know. What’s happening to house prices The latest Lloyds figures highlight an increasingly divided housing market across the UK. Performance varied significantly between regions. Northern Ireland continues to lead the way, with prices rising 7.4 per cent over the past year, while Scotland recorded annual growth of 3.6 per cent and Wales 1.6 per cent. Across England, however, a clear north-south split remains. Stronger growth in northern regions has been offset by weaker markets further south, with prices down 2 per cent in the South East and 1.3 per cent in Greater London compared with a year ago. Marc von Grundherr, director at estate agency Benham and Reeves, said: “What we’re seeing is a far more price-sensitive market, with higher borrowing costs continuing to constrain what buyers can afford and a greater degree of economic uncertainty naturally making people a little more considered in their decision-making.” His comments reflect a market where transactions are still taking place, but affordability is playing a much greater role in determining what buyers are willing – and able – to pay. Why are they stalling? Higher mortgage rates are the biggest reason demand for properties has dropped in recent months and led to a flatlining in price growth. Although the Bank of England held the base rate at 3.75 per cent last week, lenders have increased mortgage rates recently as markets responded to expectations that inflation could remain elevated for longer. Richard Donnell, head of research and insights at Zoopla, said: “Activity has stalled on higher mortgage rates and political uncertainty over recent months. “We started the year with 4 per cent average mortgage rates. By the end of April, rates were 5 per cent – they are now closer to 4.75 per cent. That’s added around £1,500 a year to the monthly mortgage costs for buying a typical home which makes people think twice.” Sarah Coles, head of personal finance at AJ Bell, also highlighted mortgage rates, but said political unccertainty too affects buyer confidence. There have been multiple rumors since Andy Burnham became Prime Minister last month about changes to property taxation – particularly mooted alterations to council tax and stamp duty – although Burnham has since ruled out a change at the October Budget. Coles said: “Mortgage rates have been nudging upwards in recent weeks, which hasn’t helped bolster buyer enthusiasm. “Meanwhile, global uncertainty coupled with domestic change makes people wary about making a major financial commitment.” The jobs market is weighing on confidence too, she highlighted, with the unemployment rate at 4.9 per cent – higher than last year – and vacancies falling again. Wesley Ranger, director at Willow Private Finance, a specialist mortgage broker, added: “What’s changed is that buyers don’t necessarily feel they have to chase the market anymore. “When prices are rising quickly, people can become worried that if they don’t buy today, they’ll pay more tomorrow. A flatter market removes some of that pressure and gives buyers more confidence to negotiate or walk away.” What you need to know if you’re a seller In a slower market, experts say getting the asking price right from the outset is critical. Property expert Jonathan Rolande said: “If you’re a house seller, there is still a good market for you, but it’s absolutely essential that you get the price right and hope that the house sells within the first few weeks. Once this window closes, chances are the property could languish on the market.” Coles said sellers should also make sure their property stands out and be prepared for tougher negotiations. She said: “When house price rises slow to a standstill it can raise concerns that a flat-lining market could tip over into a falling one. This has already happened in some areas of the South, so isn’t out of the question. In softer markets, sellers will need to work harder. “This starts with pricing realistically, but also includes looking at your home with a more critical eye, and dealing with anything that could put buyers off. “Your choice of estate agent matters more in a difficult market too, so ask about their approach to marketing and for evidence that they have had success in selling homes like yours. It’s worth getting all the paperwork in place too, so you can move fast once you get an offer.” What really moves the dial though is flexibility over negotiations, she said, and unfortunately flexibility often comes at a cost. She added: “You may need to accept a lower offer, which leaves you with gap to close if you’ve already made an offer on your new home. You might also need to rent for a period to break the chain, which can be expensive. Alternatively, if you throw in all the fixtures and fittings, you need to budget for new ones after the move.” What you need to know if you’re a buyer? A less frenetic market means buyers have more time to consider their options and, in some cases, greater scope to negotiate. Von Grundherr said: “For buyers, a period of subdued price growth can actually provide an opportunity. There is less pressure to chase the market upwards and, where a seller is motivated, there may be more scope to negotiate. “However, buyers shouldn’t assume that a national headline about stagnant prices means every seller will accept a substantial discount. “Good homes in desirable locations will continue to attract strong interest and the best approach is to have your finances in order and judge each property on its own merits.” Ranger said buyers who are organised are likely to be in the strongest position. He said: “A buyer who knows what they can borrow, has their deposit organised and has a mortgage agreement in principle is in a much stronger position to negotiate when a seller wants certainty.”