House prices were down 60 per cent on the five year average in the first week of July as the stamp duty holiday comes to an end.
This follows a bumper June, with the number of UK property transactions last month set to be the highest on record according to Knight Frank.
Tax savings fell to £2,500 from £15,000 on 1 July as the stamp duty holiday began winding down. Savings will stay at this level until the end of September, where the tax-free rate will return to £125,000.
However, Knight Frank says demand is still strong in the housing market. The number of new prospective buyers registering in the first week of July was 31 per cent higher than the five-year average for that week.
The end of the stamp duty holiday may also spur on buyers that were hesitant to make a move due to the frenzy of activity it caused.
Knight Frank also expects international buyers to reenter the UK market as travel restrictions are eased in the coming months.
However, it notes that the housing market still faces a lack of supply.
The company said there are “early signs” that this may change, as market valuation appraisals in the first week of July were 3 per cent about the five-year average.
“Stock is still low but building,” said James Cleland, head of Knight Frank’s Country business. “There will be a gradual restocking over July and August and good houses will sell well over the summer. It actually feels like we’re moving towards a better place as a rebalancing of the market is underway.”
Last week, figures from Halifax showed house prices fell 0.5 per cent in June, down £1,284 to an average price of £260,358.
Annual house price inflation also dipped slightly to 8.8 per cent, compared to 9.6 per cent in May.