UK Home Sellers Reduce Asking Prices as Property Market Slows
Data from the sales portal Rightmove has revealed that UK home sellers are slashing the prices they’re asking for property, indicating that a “slow puncture” for the market is likely to continue. The figures showed a 1.9% drop for December, which is steeper than the 20-year average and suggests that this year’s decline is more pronounced. In addition, a report from UK Finance, representing banks, predicts an 8% fall in lending for house purchases in 2024 to £120 billion (US$150 billion). These reports, taken together, indicate that a slump in prices in 2023 is likely to return, despite recent data from mortgage lenders showing a slight increase in prices.
Although a shortage of properties on the market and easing mortgage rates have helped support prices, analysts still see affordability issues and economic uncertainty as challenges for the housing market. James Tatch, UK Finance’s head of analytics, explained that buyers are strained by higher interest rates and increased living costs, as well as house prices that are still relatively high compared to income levels. He expects lending to remain weak in 2024 as these pressures are unlikely to ease significantly in the short term.
Rightmove reported that the average asking price has fallen by £6,966 to £355,177 (US$445,210). Tim Bannister, Rightmove’s director of property science, attributed the decline in asking prices to sellers trying to be more competitive amidst muted demand. He noted that higher mortgage rates have stretched affordability for potential buyers. November’s report also showed the largest fall for that month in five years.
Despite the Bank of England’s sharpest series of interest rate increases in three decades, the UK property market has remained surprisingly resilient. A year ago, economists predicted a significant fall in prices, but it has only been around half of what was anticipated according to Nationwide and Halifax’s measures. This strength can be attributed to a labour market that has held up better than expected during a cost-of-living crisis, limiting the number of forced sales. The Bank of England recently stated that it now expects fewer households to struggle with mortgage repayments than initially projected.
Mortgage lenders Halifax and Nationwide reported that prices edged up in November due to a lack of property supply pushing up valuations. While Rightmove predicts a slow start to 2024, Bannister cautioned against excessive pessimism. Asking prices are ending the year just 1.1% below where they were 12 months ago. Bannister predicts a further 1% fall in asking prices over the next year.
According to Rightmove, average mortgage rates have fallen for 19 consecutive weeks, with the average five-year fixed rate now at 5.11% compared to 6.11% in July. Bannister believes that this should attract more family buyers to the market, as many had postponed their home moves following Liz Truss’s financial programme, which caused mortgage rates to surge.
More detail via The Star here… ( Image via The Star )