The annual house price growth in the UK has continued to fall, dropping to -2.6% in June from -1.1% in May, the Halifax House Price Index has found.

The monthly report has found that the typical UK property now costs £285,932, compared to a peak of £293,992 in August 2022.

Despite the decline in prices year-on-year, the latest quarterly change has seen an increase in prices of 0.3%, despite a monthly fall of 0.1%.

The report also found that new build houses were showing resilience in property prices, increasing by 1.9% annually. However, the rate of growth is continuing to slow, and has now dropped to its lowest level in more than three years.

Existing properties, which were instrumental in driving up prices during the pandemic-related housing rush, have seen a reduction of 3.5% year-on-year in June, which is the steepest decline since August 2009.

Furthermore, the south of England remains the area where house prices are facing the most downward pressure. Sitting at -3%, the annual fall in the Southeast is the largest since July 2011.

Only three regions saw an increase in prices, with the West Midlands seeing a rise of 1.5% in house prices, and Yorkshire and Humberside and Northern Ireland increasing by 0.2% respectively.

Director of Halifax Mortgages, Kim Kinnaird, said: “The average UK house price fell slightly in June, down by around £300 compared to May (-0.1%) with a typical property now costing £285,932. This was the third consecutive monthly fall, albeit it a modest one.

“The annual drop of -2.6% (-£7,500) is the largest year-on-year decrease since June 2011. With very little movement in house prices over recent months, this rate of decline largely reflects the impact of historically high house prices last summer – annual growth peaked at +12.5% in June 2022 - supported by the temporary Stamp Duty cut.

“To some extent the annual growth figure also masks the fluctuations we’ve seen in the market over the past 12 months. Average house prices are actually up by +1.5% (£4,000) so far this year, with most of that growth coming in the first quarter, following the sharp fall in prices we saw at the end of last year in the aftermath of the mini-budget.

“These latest figures do suggest a degree of stability in the face of economic uncertainty, and the volume of mortgage applications held up well throughout June, particularly from first-time buyers. That said the housing market remains sensitive to volatility in borrowing costs. Concerns about persistent inflation have led to a significant increase in the cost of funding. Coupled with base rate rising by another 50bp, this contributed to a big jump in typical mortgage rates over the last month.”

Director of sales at Standard Life Home Finance, Kay Westgarth, added: “While bricks and mortar have intrinsic value, the amount a person is confident and comfortable spending on a home also plays a role. After thirteen consecutive Bank of England base rate increases, consumers are cautious and concerned about not only meeting affordability criteria but also managing repayments which has seen house prices fall.

"Although unsettling, it is important to remember that inflation – which is driving these rate increases – is expected to fall during the second half of the year so we should see more stability. Fundamentally, the UK property market is robust and given the ongoing undersupply of properties, homeowners should eventually see growth return.

“That said, we do not know when rates will start to fall so borrowers need to ensure that they are not complacent and consider all their options – including those outlined in the recent Government support measures. This is especially true of older homeowners who may have intended to carry borrowing into retirement but now find that their income no longer stretches as far as it once did.

“Speaking to a specialist adviser can help them to make smart financial choices which work for both the long and the short term.”

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