UK House prices in May dropped by 1 per cent on an annualised basis, the first decline since December 2012.
The mortgage lender Halifax said on a monthly basis average house prices were flat in May, having fallen by 0.4 per cent in April.
The typical UK property now costs £286,532 ($355,376), compared with £286,662 in April.
"Given the effectively flat month, the annual decline largely reflects a comparison with strong house prices this time last year, as the market continued to be buoyant heading into the summer," said Kim Kinnaird, director at Halifax Mortgages.
“Property prices have now fallen by about £3,000 over the last 12 months and are down around £7,500 from the peak in August. But prices are still £5,000 up since the end of last year, and £25,000 above the level of two years ago.“
Regional variation
Southern Britain again fared worst, with prices continuing to fall on an annual basis across the region.
Prices in the South East were 1.6 per cent lower in May this year compared with last year, while prices in the South West of the UK were 1.4 per cent lower.
In London, prices were 1.2 per cent lower in May, compared with a year earlier and the average price of a house in the capital was £536,622.
On an annualised basis, the best performing UK region was the West Midlands where prices rose by 2.7 per cent in May, bringing the value of the average house to £251,137.
The Halifax said that the value of existing houses continued to decline, falling 1.9 per cent in May. However, prices for new-build properties rose by 2.8 per cent on an annualised basis, although that was the weakest rate of growth for nearly three years.
Interest rates and inflation
Overall, the Halifax said the UK housing market was weakening and house prices would decline more in the face of high inflation and the prospect of more increases to interest rates.
“With consumer price inflation remaining stubbornly high, markets are pricing in several more rate rises that would take Base Rate above 5 per cent for the first time since the start of 2008," Ms Kinnaird said.
"Those expectations have led fixed mortgage rates to start rising again across the market.
“This will inevitably impact confidence in the housing market as buyers and sellers adjust their expectations, and latest industry figures for both mortgage approvals and completed transactions show demand is cooling.
"Therefore further downward pressure on house prices is still expected.
“One continued source of support to house prices is the labour market. While unemployment has recently ticked up from very low levels, brisk wage growth would over time help to improve housing affordability, if sustained,” she added.
Halifax's figures are slightly better than those Nationwide released last week that showed house prices fell by 3. 4 percent year on year in May 2023, the largest annual decline in nearly 14 years.
Nonetheless, analysts noted that despite the turbulence in the bond market last month, which was brought on by an increase in the core inflation figure for April, house prices have remained relatively resilient.
"While mortgage rates are on the rise again and mortgage approvals are on the decline, so far house prices have only been edging down slowly rather than falling more dramatically," said Alice Haine, personal finance analyst at Bestinvest.
"It is certainly more of a buyer’s market now than two years ago at the tail end of the pandemic when sellers had the upper hand, but people still need to move, and they may be willing to pay a premium for a property if it is their dream home.
" Whether they can afford to is a different matter, however."
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Closing the loophole on sugary drinks
As The National reported last year, non-fizzy sugared drinks were not covered when the original tax was introduced in 2017. Sports drinks sold in supermarkets were found to contain, on average, 20 grams of sugar per 500ml bottle.
The non-fizzy drink AriZona Iced Tea contains 65 grams of sugar – about 16 teaspoons – per 680ml can. The average can costs about Dh6, which would rise to Dh9.
Drinks such as Starbucks Bottled Mocha Frappuccino contain 31g of sugar in 270ml, while Nescafe Mocha in a can contains 15.6g of sugar in a 240ml can.
Flavoured water, long-life fruit juice concentrates, pre-packaged sweetened coffee drinks fall under the ‘sweetened drink’ category
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
