UK house prices recorded their first annual decline since January 2024 due to weakness in London and southern England and a summer of competitive pricing.
Fresh data from Rightmove revealed that while average new seller asking prices rose 0.4% in September to £370,257, values were 0.1% lower than a year ago.
Homes put up for sale in the south of England are taking an average of five days longer to find a buyer than in northern regions and Wales.
The supply of property in the south is also weighing on the market, with the number of homes for sale up 9% year-on-year compared with 2% in the rest of Britain.
Despite these pressures, sales agreed are 4% higher nationally than this time last year, rising 3% in the south and 5% elsewhere.
"We’d expect to see a slight uptick in new seller asking prices in September, with the traditional back to school season boosting activity heading into autumn," said Colleen Babcock, property expert at Rightmove.
"This year’s 0.4% September price rise is a little lower than the norm, which is an average of 0.6% at this time of year. However, prices have now dipped slightly from where they were at this time last year after a summer of competitive pricing by sellers, and it’s the south of England which is driving this small dip.
"It’s the sensible and attractive seller pricing we’ve been reporting which has been helping to drive more sales activity compared to last year.
"Static house prices, rising wages, and lower mortgage rates all assist buyer affordability, which has led to an increase in the number of sales agreed compared to a year ago."
She said attention is turning to rumoured changes to property taxation in the Autumn Budget, which Rightmove said would disproportionately affect London.
More than half of sales agreed in the capital this year have been above £500,000 and could be subject to a new levy, compared with 22% across the rest of England.
What's more, 11% of homes in London are priced at £1.5 million or more, versus 2% outside the capital, leaving them at risk if a so-called mansion tax is introduced.
“Rumours of property tax changes began swirling in mid-August" Babcock said. "Our analysis highlights how London and south England-centric the changes would be, and these are the areas that are already performing less strongly."
Improved mortgage affordability is providing some support, with the average two-year fixed rate down to 4.52% from 5.03% a year ago, equating to nearly £100 in monthly savings for a buyer of a typical home.