UK estate agents gloomiest in 14 years as house prices and sales fall

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UK house sales and prices fell in August as high mortgage rates hit demand for property, leaving estate agents with their most pessimistic view of the market in 14 years, a leading survey showed on Thursday.

The Royal Institution of Chartered Surveyors said its house price balance, which measures the difference between the proportion of surveyors who think house prices are rising and falling, fell to minus 68 last month from minus 55 in July.

The reading was the lowest since 2009 and well below the -56 forecast in a Reuters poll of economists.

The professional body’s report found that new buyer inquiries, a measure of housing demand, fell 2 percentage points from July to minus 47 in August, while new sales orders fell 9 percentage points to minus 26.

Investigators also reported that assessments of newly concluded sales were the weakest since the onset of the Covid-19 pandemic, when the housing market effectively shut down.

Simon Rubinsohn, chief economist at Rics, said the survey showed “a subdued housing market with little sign of relief in the outlook”, adding: “This comes against a backdrop of economic uncertainty and high mortgage finance costs. Down the road, buyer inquiries are still under pressure.”

Bar chart of the net balance between the proportion of reported price increases and decreases shows surveyors' assessment of UK house prices is the most pessimistic since 2009

Mortgage rates have risen sharply over the past two years after the Bank of England raised interest rates 14 times in a row, causing house prices, transactions and mortgage approvals to fall.

Rates on two- and five-year fixed deals have fluctuated in recent months as financial markets reassess the likelihood of further interest rate hikes, but remain well above 2022 levels.

The market expects the central bank to further raise interest rates by 0.25 percentage points to 5.5% next week to curb inflation.

As the cumulative impact of 14 interest rate hikes since December 2021 has not yet been fully transmitted, real estate agents are also more pessimistic about their expectations for the coming months.

The net balance in price expectations for the next three months fell to minus 67 in August from minus 60 in July, while the 12-month level remained essentially unchanged at minus 48, indicating a sharp contraction.

In contrast, soaring mortgage payments have boosted rental demand, with survey respondents reporting tenant demand net of 47% and expecting rental prices to rise over the next three months.

New landlord instructions continue to decline as many landlords leave the industry amid rising interest rates and taxes.

Separate research released on Thursday by property portal Zoopla showed limited rental supply and high demand have pushed rental affordability to a 10-year low, with average rents accounting for 28% of average gross income.

Myron Jobson, an analyst at investment platform Interactive Investor, said that with mortgage rates likely to remain high in the short term, buyers “have no choice but to go all out and figure out how to make those numbers work.” A new era of high mortgage lending comes into play”. Rate”.

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