Residential property prices are falling sharply, an influential survey shows.
The Rightmove House Price Index released this morning reveals that its monthly house price index for August saw a fall of more than 1% in the space of a month.
Figures released by the property portal show that the average price of a UK property dropped to £365,173 in August, marking a 1.3%, or £4,795, decline.
Although there are concerns that increasing interest rates could adversely affect the housing market, Rightmove insists that the fall was broadly in line with summer price trends over the past decade and would probably recover once potential property buyers returned from summer holidays, which for some were the first since Covid restrictions were lifted.
“A drop in asking prices is to be expected this month as the market returns towards normal seasonal patterns after a frenzied two years, and many would-be home movers become distracted by the summer holidays,” Tim Bannister, a Rightmove director, said.
Rightmove said it still expects UK house prices to end the year 7% higher than in 2021, owed largely to the supply-demand imbalance in the market.
Bannister commented: “The sixth consecutive interest rate rise, this time by 0.5% to 1.75%, will no doubt be in the minds of many would-be home-movers. Together with the rising cost of living, it will lead to re-considerations of what they can afford to borrow and repay each month. Right now, the mismatch between supply and demand is still the biggest factor influencing asking prices outside of seasonal trends.
“Although demand continues to soften, and supply constraints are improving, there is still a massive imbalance. Buyer demand this month is down 4% on the frenzied market of 2021, but is still 20% higher than in 2019. The number of new listings coming to market is up 12% on the same period last year, though it is 6% down on 2019, while available homes for sale are down 39% on 2019. Buyer enquiries to agents do not appear to have been particularly dented by the most recent interest rate rise, suggesting that many buyers are still committed to moving, and incorporating rate rises into their financial planning.
“A combination of rising house prices and interest rates means that average monthly mortgage payments for new first-time buyers putting down a 10% deposit have now exceeded £1,000 for the first time, to reach £1,032. This is 27% higher than at the start of the year. Despite this challenge, demand for properties in the typical first-time buyer sector is 32% higher than at this time in 2019.
“Several indicators point to activity in the market continuing to cool from the lofty heights of the last two years. It’s likely that the impact of interest rate rises will gradually filter through during the rest of the year, but right now the data shows that they are not having a significant impact on the number of people wanting to move.
“Demand has eased a degree and there is now more choice for buyers, but the two remain at odds and the size of this imbalance will prevent major price falls this year. For those looking to move who are concerned about interest rate rises, it’s important that they get a mortgage in principle early on in their moving journey to understand what they could afford to borrow, and find out about the rates available to them to assess what they are able to repay each month.”