According to the Royal Institution of Chartered Surveyors (RICS) Residential Market Survey for October, new buyer enquiries slipped to a score of negative 55 per cent*, down from negative 36 per cent in September.
The decline in buyer demand was apparent across all regions of the UK which is the second month in a row this has happened.
The average time to complete a sale increased to 18 weeks, which RICS said signified the pattern of a weakening market. This time last year, the time it took from a property being listed to completion was around 16 weeks.
Simon Rubinsohn, chief economist at RICS, said: “The latest feedback to the RICS survey provides further evidence of buyer caution in the face of the sharp rise in mortgage costs. As a result, the volume of activity is likely to slip back over the coming months and realistic pricing is now much more important to complete a sale.
“The settling down in financial markets could provide some relief although it may be premature to assume this will be reflected in a reduction in lending rates anytime soon. However, the employment picture remains critical to the medium-term outlook and for the time being, that remains solid.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Never was the saying – confidence takes a long time to build but can disappear almost immediately – so true for the property market.”
House price moderation
The growth in average house prices appeared to lose steam in October, as respondents gave a score of negative two per cent down from 30 per cent the month before. RICS said this ended the 28-month streak of positive house price growth being reported by respondents.
The slowdown in house price growth varied across the UK, with East Anglia recording a score of negative 31 per cent and the South East scoring at negative 16 per cent. Respondents in Northern Ireland and Scotland reported a continued, albeit softened, rise in house prices.
Looking ahead, respondents gave a score of negative 42 per cent for house price growth, compared to negative 18 per cent in September.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said even the “naturally optimistic” estate agents had realised “the writing is on the wall for house prices”.
She added: “Buyers and sellers have decided now is not the time to take the plunge and have packed up and gone home. This was the sixth consecutive month where the number of new buyers fell – and the numbers are weakening more quickly now too.
“As a result, property prices have stalled. In some areas agents are already reporting that prices are on their way down, and because momentum is so important in the market, where we get small price drops, there’s the risk they help to fuel more significant falls. It’s one reason why agents are resigned to a market correction in the coming year.”
New property listings also fell, with a score of negative 17 per cent which RICS described as a “diminishing trend”. The number of market appraisals was also down compared to last year, falling to a respondent score of negative 37 per cent compared to negative 20 per cent last year.
Rental demand grows
Tenant demand for rental properties rose in October, with a score of 46 per cent in October.
Despite this, landlord instructions fell again to negative 14 per cent. RICS said this mismatch could result in higher rents in the near-term as respondents gave a score of 52 per cent for rent expectations. Over the next 12 months, respondents expect rents to rise by around four per cent nationally.
Richard Rowntree, managing director, mortgages at Paragon Bank, said the survey covered a period of “lingering uncertainty” around the UK economy following the mini Budget. He said amid higher mortgage rates and growing regulatory obligations “we see how the appeal of buy-to-let investing further diminishes”.
Rowntree said: “This is reflected by continued low levels of landlord instructions reported by survey respondents in recent months.
“With rates starting to come down now that some stability has returned to the market, I anticipate a return to purchase activity amongst the landlords who have built up substantial equity in their portfolios as a result of increases in property prices, with investors seeking to meet the continued strong demand for privately rented homes.”
Rubinsohn added: “As far as the lettings market is concerned, the imbalance between demand and supply still appears unusually extended leading to rent expectations in the survey remaining at elevated levels and it is difficult to see this changing anytime soon in the current environment.”
* RICS survey statistics are presented as scores between negative 100 and 100, with negative scores implying a decline, and positive readings suggesting an increase.
