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Are House Prices Set To Slow?

UK house prices fell for the first time in over a year last month, falling 0.1% month on month, according to many sources including the Halifax Building Society.
Of course the headline will read that this is the first monthly drop in UK house prices but in reality it's a very marginal drop and on an annual basis house price growth remains at a strong 11.8%.
I have to agree with PropertyNotify who comment that it is inevitable that UK house prices will be affected by rising interest rates and the cost of living crisis – which looks set to deteriorate further with inflation peaking above 13% and UK energy prices set to worsen in the coming months.
This will severely impact demand for both mortgages and UK houses.
Yet on the positive side, the UK labour market remains very strong and its possible UK interest rate rises may not be as aggressive as initially feared due to the Bank of England's concerns about UK economic activity.
That may give the UK housing market some relief. Yet make no mistake, 2023 looks like it could be a challenging year for UK house prices.

While we shouldn’t read too much into any single month, especially as the fall is only fractional, a slowdown in annual house price growth has been expected for some time.
Leading indicators of the housing market have recently shown a softening of activity, while rising borrowing costs are adding to the squeeze on household budgets against a backdrop of exceptionally high house price-to-income ratios.
That said, some of the drivers of the buoyant market we’ve seen over recent years – such as extra funds saved during the pandemic, fundamental changes in how people use their homes, and investment demand, still remain evident.
The extremely short supply of homes for sale is also a significant long-term challenge but serves to underpin high property prices.
Looking ahead, house prices are likely to come under more pressure as those market tailwinds fade further and the headwinds of rising interest rates and increased living costs take a firmer hold.
Therefore a slowing of annual house price inflation still seems the most likely scenario,

This summary is echoed by agents Knight Frank who comment that The Bank of England’s latest set of economic predictions will impact sentiment, as they did in May, but the fundamentals of the property and labour market are strong and we would expect double-digit annual growth to become single-digit growth by the end of the year.