Average asking prices fell by £82 in June to £372,812, according to Rightmove, the first monthly drop this year and the first June fall since 2017.

Buyer affordability constraints and more pricing realism from new sellers have prompted the summer slowdown, said the property portal.

Annually, house prices rose by just 1.1%, down from 1.5% last month.

Rightove added that asking prices are set to fall in most months for the rest of the year in line with the usual seasonal pattern. It is sticking with its prediction of an overall 2% annual drop in average asking prices by the end of 2023.

Demand holding firm

Despite sharp rises in mortgage rates in recent weeks, Rightmove’s statistics show no effect on buyer demand but a slight impact on sales activity. It said buyer demand over the last two weeks is 6% higher than the same period in 2019’s ‘more normal’ market, while the number of sales agreed is now 6% behind the same period in 2019.

Tim Bannister, Rightmove’s director of property science, said: “Average new seller asking prices, the first and leading indicator of new trends in the market, have dropped slightly this month, signalling that the belated spring price bounce has quickly turned into an earlier than usual summer slowdown.

“We expect asking prices to edge down during the second half of the year which is the normal seasonal pattern, and while we sometimes re-forecast our expectations for annual price changes at this time, current trends suggest that our original forecast of a 2% annual drop in asking prices at the end of 2023 is still valid.

“Agents report that new sellers are sitting in two camps – those who still have overoptimistic price expectations following the buoyant pandemic market, and those who have adapted to the new conditions and are coming to market with a competitive price. Sellers who price competitively are much more likely to find a suitable buyer quickly before their home appears stale, and they can often then negotiate on price on any onward purchase.”

Sarah Coles, head of personal finance at Hargreaves Lansdown, added: “Sellers are determined to ignore the elephant in the room – even though it’s pinning would-be buyers to the ground, and squeezing the life out of the market. On average, asking prices fell just £82 in June, despite horrible rises in mortgage rates.

“At the end of last week, the average two-year fixed rate mortgage was just shy of 6%, and there’s no sign of the hikes coming to a halt in the immediate future. This could have a profound impact on buyers, who suddenly find they’re priced out of the market. Some won’t be able to afford repayments at this level, whereas others may still be keen, but could find themselves falling short of affordability criteria.

“Plenty of sellers have refused to acknowledge this shift in the market, and are still pricing their homes at an average of £372,812 – up 1.1% in a year. It remains to be seen whether they’ll find buyers at this level, or whether we’ll see prices cut as reality dawns.”