Britain’s housing market is in its worst state since the financial crisis, the Royal Institution of Chartered Surveyors (Rics) has said, as high property prices and mortgage rates trigger a slump in sales.
House price falls in July were more widespread than at any point since 2009, according to RICs’ UK residential market survey of estate agents.
At the same time, the net balance of agents reporting a downturn in agreed sales has more than quadrupled since May. The slump in house sales recorded in July was comparable to that seen during 2007, RIC said.
Meanwhile, expectations of a rise in rents hit a fresh record high as tenant demand continues to soar and more landlords quit the sector. Despite some lenders cutting rates in recent weeks, Simon Rubinsohn, chief economist at RICS, said that an uptick in mortgage approvals was likely to be reversed in the coming months as the Bank of England continues to raise rates.
He added: “The continued weak reading for the new buyer enquiries metric is indicative of the challenges facing prospective purchasers against a backdrop of economic uncertainty, rising interest rates and a tougher credit environment.”
Buyer inquiries fell in every region of the UK during July, signalling a sharp downturn in demand. Survey respondents warned transactions would fall more steeply in the months ahead.
The number of agents reporting house price falls had moderated following a material drop in mortgage rates in the spring, but has now plunged.
Price cuts are becoming increasingly widespread in a clear sign that further falls are in the pipeline.
Robert Cooney, of Robert Cooney estate agents in Taunton, said: “Price reductions are now required to effect traction on most properties.”
William Delaney, of Coopers of London estate agents, said that even offers “way below the asking price” were in some cases being accepted.
The South East, Yorkshire and the Humber and the East Midlands will see the biggest price falls in the next three months, agents warned.
The number of agents expecting rent prices to rise over the next three months exceeded those anticipating drops by a margin of 63pc – the largest in any month since RICs’ records began in 1999.
Before 2021, when the end of lockdown restrictions brought a surge in demand after the pandemic had pushed more landlords to sell up, this figure had never exceeded 40pc.
Mr Rubinsohn said: “Demand shows no signs of letting up, supply remains constrained and that means rents are likely to continue rising sharply despite the cost-of-living crisis.”
Scotland, where the SNP has introduced caps on rent rises, saw the most widespread falls in the number of available rental properties. Grant Robertson, of Allied Surveyors Scotland, blamed Nicola Sturgeon’s “relentless attack on the private rental sector”.
Nationally, demand for rental property is likely to rise further as high mortgage rates lock more potential buyers out of the housing market.
