House prices across the UK have recorded their steepest August decline since 2018, as Budget uncertainty and geopolitical tensions continue to weigh heavily on the property market.
The average house price fell by two per cent this month to £364,999, according to property portal Rightmove, with prices now down one per cent year-on-year.
That annual decline represents the largest such drop since December 2023, adding to growing concern among buyers, sellers, and industry experts about the direction of the market.
London continues to bear the brunt of the downturn, with house prices in the capital falling by 3.1 per cent in the year to August, driven by higher mortgage rates and fears of tax hikes.
House prices across the south of England are down 1.8 per cent year-on-year, while the north has seen modest growth of 1.5 per cent over the same period, highlighting a deepening regional divide.
Rightmove has cut its forecast for national house price growth to between zero and minus two per cent, citing a difficult and unpredictable environment for the remainder of the year.
“The uncertain geopolitical picture, changing mortgage rate landscape, and [the] new Chancellor’s first Budget in October [is] making it difficult to predict the rest of the year,” the property portal said.
London’s price falls are particularly striking given that the number of homes available in the capital has reached its highest level in 16 years, according to Rightmove data.
The average house in the capital costs about 17 times the national average wage, and buyers face additional pressure from stamp duty costs and the £450,000 cap on lifetime ISAs, which disproportionately affects first-time buyers in the city.
Colleen Babcock, a property expert at Rightmove, highlighted the compounding affordability pressures facing those looking to buy in London, particularly around taxation and price-to-income ratios.
“Alongside an abundance of choice, the capital faces greater affordability challenges for buyers, through both high price to income ratios and higher taxation,” Babcock said.
Rightmove noted that the national market had benefitted from a “mini Burnham bounce” in recent weeks, with the UK’s new Prime Minister bringing a “renewed general optimism” to the market.
However, that boost proved insufficient to offset the broader slump in confidence, as buyers and sellers brace for potential reforms to property taxes ahead of October’s Budget.
Prime Minister Burnham has previously supported replacing council tax and stamp duty with a land-value tax, though he ruled out such plans last month following reports that officials were drawing up proposals for the reform.
The ongoing Iran war has also kept mortgage rates higher than previously anticipated, adding a further layer of pressure to an already strained housing market.
Tom Bill, head of UK residential research at Knight Frank, said: “Rising mortgage rates and uncertainty around tax rises in the Budget are curbing demand, which is being felt more acutely in parts of the country where affordability is already stretched.”
“The unpredictable events in the Middle East mean there is nothing to suggest mortgage rates will drop materially in the short term, which should continue to keep a lid on prices this year,” Bill added.