Average asking prices of homes coming to market fell by £905 or 0.2% month-on-month in July, according to property website Rightmove.
Across Britain, the average asking price for a home is now £371,907 - this is still 2.6% higher than in January. But will rising interest rates on mortgages push house prices down further in 2023?
Rightmove said rising mortgage rates are biting, with house sales now lagging behind the more “normal” market seen before the coronavirus pandemic in 2019.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
While buyer demand remains resilient, the choice of available properties for sale is 12% lower than it was at the same point in 2019 as more people consider if now is a good time to buy a house.
Latest Videos FromMoneyWeek
Tim Bannister Rightmove’s director of property science, said: “While prices and sales bounced back this year much more strongly than most expected, the unexpectedly stubborn inflation figures and the surprise of further mortgage rate rises when many felt that they had stabilised have contributed to the fall in prices and number of sales agreed.
“However, buyer demand remains resilient at 3% above 2019’s more normal market levels, buoyed by a shortage of quality property for sale and ongoing housing needs. First-time buyers, trader-uppers and downsizers with higher deposits and lower mortgage requirements appear to be still keenly searching the market, not wanting to miss out on the right property that is not over-priced and that they can still afford.”
First-time buyers remain eager
Rightmove said smaller homes with a maximum of two bedrooms have been less impacted by the more subdued market.
This reflects the determination of the first-time buyer sector, as well as being an indication of some people deciding to retire early and downsize to a smaller property, it added.
Estate agents are reporting that even with market challenges, homes priced correctly in line with local market conditions are still attracting strong interest from motivated buyers keen to move, according to Rightmove.
Bannister added that while some movers are pausing until there is more certainty over mortgage rates and they have reviewed how higher costs affect their plans: “There remains a large volume of motivated buyers who can factor rate rises into their budgets and are continuing to inquire about homes for sale, which is keeping the market functioning, albeit now with lower sales levels than at this time in 2019.
“Sellers who price right the first time, rather than starting with too high an asking price only to reduce later, have a much better chance of attracting one of these motivated buyers, and a good local agent will provide sellers with accurate evidence of prices that are being achieved in their area.”
What is happening with rent prices?
In a separate index, property firm Hamptons found the average rent on a newly-let property in Britain rose to a record high of £1,273 per month in June.
The average rent costs around £110 per month or 9.4% more than a year earlier. A one-bedroom home in Britain is £1,017 per month on average, according to the report - around the same rent as the average two-bedroom property cost in April 2022, Hamptons said.
Meanwhile, the average two-bedroom property rental price (£1,170 per month) has reached the same level as the cost of a three-bedroom home in January 2022.
Will mortgage costs lead to defaults?
Falling house prices combined with rising mortgage costs are leading to more mortgage defaults according to the Bank of England (BofE). In the three months to June, lenders reported a 30% rise in mortgage defaults but have warned the figure could rise.
Last week, the average two-year, fixed-rate mortgage for homeowners hit 6.75%, according to Moneyfacts - more than triple the average rate of 2% seen at the beginning of the year and higher than the top rate seen after the mini-Budget.
Join us at the MoneyWeek Summit on 29.09.2023 at etc.venues St Paul's, London.
Tickets are on sale at www.moneyweeksummit.com
MoneyWeek subscribers receive a 25% discount.
