UK house prices experienced their sharpest July decline in more than 20 years, as sellers cut prices aggressively amid heightened competition to attract cautious buyers.
The average asking price for a property newly listed for sale dropped by 1.2% (£4,531) this month, down to £373,709, according to monthly data from property website Rightmove.
While a seasonal drop in July is common, the scale of this month's reduction is notable, driven by a continued glut of homes available for sale, the highest in a decade.
London led the nationwide price reductions, with average asking prices in the capital dropping by 1.5%, driven particularly by inner London's 2.1% decline.
London struggles
The city's higher property prices have been particularly sensitive to recent increases in stamp duty, taxes paid on property purchases, especially affecting second homes and investment properties.
Concerns over potential tax changes, including adjustments affecting overseas investors, have also dampened enthusiasm in the central London market.
Despite falling prices, the market is experiencing higher activity levels compared with last year.
Sales agreed, the stage at which buyers and sellers commit to a transaction, have risen by 5% compared with the same period in 2024. Meanwhile, the number of new potential buyers making enquiries through estate agents is 6% higher.
Colleen Babcock, property expert at Rightmove, commented: "We're seeing an interesting dynamic between pricing and activity levels right now.
"The healthy and improving level of property sales being agreed shows us that there are motivated buyers out there who are willing to finalise a deal for the right property."
Modest asking prices
The modest asking prices, combined with steadily declining mortgage rates and wage increases, are making homes more affordable for buyers.
Average asking prices are now just 0.1% above where they were a year ago, while average wages have grown by over 5%.
The average two-year fixed-rate mortgage has dropped to 4.53% from 5.34% a year earlier, translating into monthly savings of nearly £150 for buyers taking out a typical new mortgage.
Amid this backdrop, Rightmove has revised its forecast for average house-price growth in 2025 downward, from 4% to 2%. The company maintains its prediction that total property transactions this year will reach 1.15 million.
"Crucially, buyer affordability is heading in the right direction, and another two Bank Rate cuts before 2026 would be a big boost," added Babcock.
While London struggles, the picture is brighter in lower-priced regions. The North East, Britain's least expensive property market, saw prices rise 1.2% this month, continuing the recent trend of stronger price growth in more affordable regions.