By Debbie Franklin, Director of Tax and property tax specialist
In the largest fall in house prices since 2011, prices fell by 2.6% in the year to June 2023, meaning the average UK house price fell by £7,500.
This data, taken from the most recent Halifax index, also shows that in June 2023, house prices declined for the third month in a row. Analysts believe that the recent decline was to be expected following the surge in house prices in Summer 2022, which was largely fuelled by the temporary stamp duty cut.
The index also notes that pricing behaviour is shifting, with sellers cutting their asking price in response to the market being under strain from high mortgage costs. Halifax also predict that this strain on peoples' finances will fuel further price decreases in the months ahead.
Mortgage rates
A recent report by real estate firm Hamptons has found that almost 225,000 property owners could lose money on their rental properties when they come to renew their buy-to-let mortgages, the rates of which are approaching 7%.
The report found that 226,930 rental properties (11% of all mortgaged rental properties) will not generate sufficient income to cover costs at the current mortgage interest rates.
Approximately 70% of buy-to-let landlords own a property that is mortgaged. This is a much higher percentage than for owner-occupiers, which means this sector is more at risk from higher interest rates.
Increasing mortgage rates, together with tax increases such as the withdrawal of higher-rate tax relief on mortgage interest and additional stamp duty on additional homes, mean that even if the average higher-rate taxpayer landlord were to increase annual rents in line with the national average, they would still lose £119 a month.
Advice for those investing is to put down much bigger deposits than before.