UK house price data from Halifax has provided more evidence that the market losing steam and could be the 'canary in the coal mine' of the economic downturn and coming recession the Bank of England warned of this week.
In July average house prices fell 0.1% on the month, though were up 11.8% on a year ago.
It was the first monthly fall since June last year and comes after figures earlier this week showed mortgage borrowing was also starting to decline.
This was even before most people felt the impact of interest rate hikes, including the 0.5 percentage point rise announced by the Bank yesterday.
"July’s house price weakness could be a canary in the coal mine: an early sign of more worrying changes ahead," said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.
"This is a clear indication that the market is cooling, and it’s not the only one."
The weight of headwinds facing housing demand point to subdued prospects for growth ahead, said economist Martin Beck, at the EY ITEM Club.
“After Nationwide’s measure of house prices showed a 0.1% rise in house prices in July, the Halifax measure went one further, delivering an outright fall.”
July’s decline is consistent with a housing market increasingly under pressure from a variety of headwinds, Beck said.
Mortgage rates are rising quickly, with the average rate on a new mortgage reaching 2.16% in June, up almost 0.70 percentage points from last autumn’s low and the highest since late 2016.
“High inflation, with the prospect of worse to come, means household incomes are experiencing the biggest real-terms squeeze in decades,” said Beck.
“However, pressure on the housing market is only going to increase in coming months and affordability is looking increasingly stretched.”
Beck said the EY ITEM Club isn’t expecting a significant contraction in the housing market.
“Previous significant corrections in values have tended to coincide with steep rises in unemployment, increasing the number of ‘forced’ sales.”
“But the backdrop this time looks far more benign” with “demand for workers very strong as evidenced by record-high vacancies," he said.