House prices were down year-on-year in May but housing supply and numbers of agreed sales improved.
Prices were down 0.1% on average compared to a year ago, according to Zoopla's house price index, with higher mortgage rates and a reversal of the pandemic's demand trends.
Cities near the coast saw the largest falls alongside areas that attracted an inflow of demand over the pandemic in the ‘race for space’, the housing platform said, as demand weakens and the one-off pandemic factors fade.
Zoopla expects the current variation in house price inflation to continue over 2024 as incomes and house prices realign, with the greatest adjustment across London and southern England.
However, housing supply improved with the number of homes available for sale in the UK reaching the highest level in eight years.
There were also more sales agreed, which means market activity "continues to improve", Zoopla said.
"There remains a clear divide between continued small annual price falls across southern England and the rest of the UK, where house prices are posting modest gains," said Zoopla research director Richard Donnell.
"Higher mortgage rates contribute to this variation, with levels of affordability and demand having a big impact on prices."