Despite 25% of property professionals reporting a decline in new buyer inquiries house prices continued to increase in July, the latest Royal Institution of Chartered Surveyors (RICS) market survey found.
This marks the third consecutive month of falling demand and has led professionals to feel the most pessimistic about sales since the first Covid-19 lockdown in March 2020.
Those who expressed a negative outlook when surveyed by RICS attributed it to higher interest rates and the cost-of-living crisis.
But despite this, property prices are continuing to increase as low stock levels fuel the market.
Some 63% of those surveyed said they had seen prices go up in July suggesting that there is still some way to go before price growth halts.
Tarrant Parsons, senior economist at RICS, said: “Amid a backdrop of sharply rising living costs, slowing economic growth and higher interest rates, it is little surprise that housing market activity is now losing some momentum.
“With monetary policy set to be tightened further over the coming months, sales expectations point to a further softening in transaction volumes going forward.
“Nevertheless, with respect to house prices, limited supply available is still seen as a crucial factor underpinning the market. Although house price growth is likely to continue to ease, respondents still anticipate prices will be modestly higher than current levels in a year’s time.”
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Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“We are finding at the sharp end that the desire to move is outweighing worries about continuing increases in interest rates and the cost of living.
“On the other hand, those concerns are disproportionately affecting lower income households which is compromising the bottom of some chains, resulting in fewer and lengthier transactions.
“Demand is supported in particular by lack of choice, low unemployment and rising rents so prices are still growing for now at least – albeit more slowly.”
Tomer Aboody, director of property lender MT Finance:
“The latest data points to a fall in demand from buyers due to a less bullish outlook following numerous interest rate and inflation increases.
“However, despite the number of new buyers edging downwards, property prices continue to rise due to the continued lack of stock.
“With little change in the number of market appraisals, it looks as though supply is unlikely to improve in the near future, which will continue to support price rises, although at a more moderate pace.”
Emma Cox, MD of Real Estate at Shawbrook:
“Despite well-documented challenges, the property market continues to show resilience, and many buyers remain committed to going ahead with their plans.
“Although we’re not out of the woods as the ongoing threat of a recession and rising cost of living may dissuade people from moving in the future.
“In the lettings market, demand continues to be strong amidst a shortage of quality rental supply and low stock levels amongst estate agents.
“However, with the current cost-of-living crisis and rising energy bills factored in, it is likely that this will translate into increased rental prices for would-be tenants.
“On a more positive note, lenders are continuing to offer competitive mortgages and LTVs, which can offer better protection against further rate rises.
“What isn’t quite as clear, especially during the change of leadership in Westminster, is how the Government intends to support landlords and homeowners to ensure the UK has a long-term supply of high quality, energy efficient homes.”
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown:
“Bidding wars are increasingly giving way to more cheeky offers, particularly on pricier properties. Half of agents say that properties under £500,000 are no longer selling for more than the asking price, while those priced at more than £1m are being forced to accept lower offers. It’s another sign that the property market is starting to turn.
“Sales are also falling, and agents expect them to keep dropping in the coming months. Meanwhile, after such a long time of ever-increasing buyer numbers, we’ve seen a second month where fewer buyers are on the hunt for a home. House prices are still rising, because buyers still vastly outstrip sellers, but they’re starting to ease a little.
“Plenty of agents are feeling the impact of less demand. Others are highlighting that even when people decide to buy, life continues to get harder, so more sales are falling through as they worry about job security and rising prices. Some agents say that agreed prices are being renegotiated.
“However, it’s still a very mixed picture, and some agents say it’s as busy as it has ever been, and some buyers are in a hurry to snap up a property before mortgages get even more expensive.
“The rental market remains horrible. The number of tenants is up again, including would-be first-time-buyers who are worried about the cost of living, and have decided to rent again instead. Meanwhile, the number of landlords has dropped for the third month in a row. Some are warning that legislative changes are driving more landlords out of the market, so with nobody filling the gap, shortages are getting even worse. It means that agents aren’t expecting any let-up in rising rents.”
