National house prices have continued to fall but surveyors report that the pace of decline appears to be levelling off, according to the latest report from the Royal Institution of Chartered Surveyors (RICS).
Northern Ireland, where prices are increasing, is bucking the trend.
The findings from the October Residential Market Survey are at odds with the latest house price indices from Halifax and Nationwide where small monthly increases were recorded by both mortgage lenders.
Over the next three and 12 months, RICS surveyors expect house prices to continue to fall mirroring the expectations of other market commentators. Zoopla forecasts a decline of two per cent in 2024.
Surveyor sentiment is most negative across the East Midlands, West Midlands and Yorkshire and the Humber.
Valuers based in Scotland and Northern Ireland anticipate a rise in house prices over the course of the next 12 months.
The volume of new buyer enquiries remains in negative territory for the 18th month in a row as more surveyors report a fall in demand than those who have a seen a rise,
The outlook is less gloomy than last month, however, with the net balance of surveyors who say the have seen a fall in new enquiries dropping from -37 per cent* to -28 per cent month on month.
Negative demand was recorded in almost all parts of the UK with the exception of the North West and Northern Ireland where new buyer enquiries have remained flat.
The lack of supply of homes to buy is not expected to change materially in the near term as new instructions coming to the market continues to slow. The volume of new homes listed contracted for the fifth consecutive month.
The number of agreed of sales is also in decline. Those sellers who manage to secure a buyer are having to lower their price by an average of 4 per cent, according to Zoopla.
However, the proportion of surveyors who have reported a fall in agreed sales has continued to reduce from -45 per cent and -35 per cent recorded in August and September respectively to -25 per cent last month. Looking ahead, surveyors say any significant turnaround in sales activity is unlikely this year but over the next 12 months a broadly stable outlook for sales activity is expected.
Higher rates dampen activity
Rob Morgan, chief investment analyst at Charles Stanley, said: “Just as ultra-low interest rates helped fuel house price rises by making borrowing more affordable, higher rates are now dampening activity and prices, a headwind unlikely to abate any time soon. The battle with inflation is far from over, which means the clouds over the economy and the housing market are likely to persist. Although the Bank of England may have reached the end of its cycle of increasing interest rates, they are long way from thinking about cutting them. Inflation is way above the BoE’s 2% target, and geopolitical fractions and wage increases may yet mean it proves stubborn.”
Sarah Coles, head of personal finance for investment platform Hargreaves Lansdown, said: “The stalled property market pushed prices lower in October. But for sellers, the real headache is that stagnating sales mean it’s incredibly difficult to shift a property. If they’re going to sell, they need to be brutally realistic about what their home is worth.
“Not only have sales slowed to a snail’s pace, but RICS says there are fewer properties coming to the market right now, so there are fewer in the pipeline for the rest of 2023. This could end up supporting house prices, and confounding the expectations of agents who are predicting more price falls in the coming months. However, this is meaningless for sellers if they can’t persuade anyone to buy.”
Although sellers are prepared to shave off a small portion of the asking price, Coles says that by overpricing and then cutting, they risk squandering the initial interest in the property.
“Sellers have a choice,” added Coles. “If they don’t desperately need to move, they might want to wait it out until mortgage rates drop and buyers come back. If they need to sell, they have to price their home realistically – brutally so. This means seeing through the over-inflated estimates of agents desperate for more properties on their books, checking the sale prices of homes nearby, and pricing to sell.”
* RICS survey statistics are presented as scores between negative 100 and 100, with negative scores implying a decline, and positive readings suggesting an increase.
