RICS: House prices fall in the South East as market grinds to a halt
House price growth stalled in October – after rising for 28 months in a row. In some areas, prices were falling – including the South East and East Anglia. Agents are now expecting prices to drop over the coming year.
Buyers and sellers have been leaving the market in droves. The average time from listing to completion hit 18 weeks – up from 16 a year ago. Rents are set to keep climbing, as tenant numbers rise and landlords leave the market.
Sarah Coles, senior personal finance analyst. Hargreaves Lansdown said: “Even naturally optimistic estate agents are starting to think that the writing is on the wall for house prices. The chaos in the mortgage market in the aftermath of the mini budget has been devastating, and the looming recession is likely to take an even bigger toll. House prices have already stalled, and in some areas they’ve started falling.
Mortgage rates have since dropped back slightly, and the Bank of England has been keen to emphasise that inflation is nearing the peak, so rate rises may not need to be so big or so numerous in future. However, they also warned of a two-year recession looming, which is going to dent buyer confidence even further. The risk of your mortgage rate rising and becoming incredibly difficult to afford is bad enough, but the risk of losing your job and not being able to afford it at all is horrendous.
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.
This isn’t going to be bad news for everyone, but it is going to make life difficult for anyone trying to sell quickly. The process is already taking longer, so they’ll need to price their home realistically and be prepared to accept an offer. Buyers are going to want to feel they’re getting a particularly good deal to protect them from market falls.
If prices fall far enough, it could also cause problems for anyone who has bought relatively recently who needs to remortgage or move, and finds themselves trapped by negative equity. Technically it could be better news for anyone trying to get onto the property ladder or trade up. Unfortunately, it also makes both of these things riskier. First time buyers are likely to have smaller deposits, while second steppers will be significantly eroding the equity they have by moving to a more expensive home, so both will face the risk that prices could fall far enough to push them into negative equity.
For anyone who decides to rent for a while – and wait to see what the market has in store – there’s more bad news. October saw yet another month of rising tenant numbers and disappearing landlords, so rents are still climbing, and finding a rental property is still an uphill struggle.”