Pace of house price falls ‘showing signs of steadying as end of year approaches’

The pace of house price falls may be steadying as the end of the year approaches, according to surveyors.

A net balance of 63% of property professionals reported house prices falling rather than increasing in October, edging down from a balance of 67% in September, the Royal Institution of Chartered Surveyors (Rics) said.

Its report said the latest house price reading “suggests the pace of decline, from a national perspective, has levelled off in recent weeks. Nonetheless, the house price metric remains deeply negative across most parts of the UK, even if the latest readings have moved off the lows hit over the past couple of months in the majority of cases”.

Rics said “bucking the aggregate picture”, survey participants continue to cite a steady increase in prices across Northern Ireland.

More homes need to be built in the right places and more of them need to be affordable

Sales activity remained weak, with a net balance of 25% of property professionals reporting a decline in sales rather than a rise in October.

Sentiment suggests there is unlikely to be any significant turnaround in sales through the remainder of 2023, Rics said.

However, looking 12 months ahead, property professionals’ sales expectations suggest there will be a more stable outlook in the coming year, the report said.

In the rental market, tenant demand is continuing to rise overall, while landlord instructions are falling.

Amid this imbalance between demand and supply, survey participants predict a rise in rental prices over the next three months.

Over the next 12 months, rents are expected by surveyors to rise by around 4% on average across the UK.

Mortgage affordability will remain stretched over the near-term, leaving little prospect of a strong rebound in residential sales volumes

Rics senior economist Tarrant Parsons said: “Plenty of caution remains evident with respect to both buyer and seller activity across the UK housing market, albeit the latest survey feedback points to a slightly less negative picture than that reported over the previous few months.

“Although base interest rates have now been kept on hold at each of the past two MPC (Bank of England Monetary Policy Committee) meetings, the Bank of England was keen to emphasise that monetary policy is set to stay at a restrictive setting for quite some time yet.

“As such, mortgage affordability will remain stretched over the near term, leaving little prospect of a strong rebound in residential sales volumes, even if expectations have now moved away from cyclical lows.”

Rics senior public affairs officer Dominic Collier said: “More homes need to be built in the right places and more of them need to be affordable.

“Existing homes require more support to improve their energy efficiency, to reduce their bills and help tackle our net-zero targets. We will continue to collaborate with the Government in addressing these challenges but also these opportunities.”

The report included comments from property professionals.

One, based in Newcastle-upon-Tyne, wrote: “Need rapid and easy increase in supply, stop selling council houses etc.”

Another, based in Cambridge, said: “Residential sales activity very slow and not expecting any tangible increase in activity until sometime in 2024 now.”

A Kidderminster-based professional said: “Sales market has slowed earlier this year but still demand from first buyers. More expensive property slow to sell as family budgets remain tight.”

And a Cardiff-based professional said: “Vendors are finally recognising that it is now a buyers’ market and are starting to be more flexible on price.

“Buyers have a wider choice and are driving a hard bargain or looking elsewhere. Uncertainty over mortgage interest rates still a factor, although the desire to move remains.”

An Edinburgh-based professional reported: “Fewer enquiries, but buyers are still motivated. More sales being agreed at less than home report, albeit family houses still getting premiums occasionally.”

Commenting on the report, Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Sellers have a choice. 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.”