House prices slipped by 0.1 per cent month on month to £237,616 in June, but were 2.5 per cent higher than a year ago, the latest index from Halifax shows.
It was the first time in a decade that house prices have fallen for four consecutive months.
The last occasion was in 2010 as the market struggled to recover from the financial crisis.
However, on a more positive note, June is typically the busiest month for mortgage activity and enquiries surged to double the level recorded in May.
Halifax managing director Russell Galley says: “New mortgage enquiries were up by 100 per cent compared to May, and with prospective buyers also revisiting purchases previously put on hold, transaction volumes rose sharply compared to previous months.
“However, whilst encouraging, it remains too early to say if this level of activity will be sustained.
“The near-term outlook points to a continuation of the recent modest downward trend in prices through the third quarter of the year, with sentiment indicators, based on surveys of both agents and households, currently at or around multi-year lows.
“Of course, come the autumn, the macroeconomic landscape in the UK should be clearer and the scale of the impact of the pandemic on the labour market more apparent.
“We do expect greater downward pressure on prices in the medium-term, the extent of which will depend on the success of government support measures and the speed at which the economy can recover.”
Trussle head of mortgages Miles Robinson says: “We are beginning to see a clearer picture of the consequences of the pandemic on the property market.
“However, the slowdown has opened a window for first-time buyers with a sizeable deposit and it seems next-time buyers are undeterred also.
“When comparing the six weeks before the property market freeze with the six weeks after, we saw a 206 per cent and 209 per cent increase in first-time buyer and next-time buyer applications respectively.
“This buoyancy is seen further in the so-called ‘rural renaissance,’ whereby city dwellers are opting to relocate to the countryside.”
Robinson says that activity could be further boosted by the reemergence of higher loan-to-value deals and a possible stamp duty holiday to be announced tomorrow.
Coreco managing director Andrew Montlake says: “The property market is holding up fairly well for now, but nobody can deny the extraordinary economic challenges that lie ahead.
“The market is being driven on by nervous energy and sooner or later that energy will run out.
“Wednesday’s Summer Statement will be eagerly watched to see what measures the Chancellor will announce to potentially stop the market grinding to a halt.
“The second half of 2020 is likely to be as economically exacting as the first half was surreal.
“The government has an extraordinary task ahead to keep people in jobs, which will clearly be pivotal to the future direction of house prices.”
