Residential property prices fell by 1.3% in August with £4,795 being wiped off the average property’s value, according to the latest Rightmove house price data.
The fall, down to an average of £365,173, is the first one reported by Rightmove this year but it is worth noting that prices do traditionally dip in August.
And this drop is right on the money coming in at the 10-year average for August of 1.3%.
Rightmove attributed the decline to seasonality and the fact that some of the more urgent sellers who are coming to market are pricing more competitively in an attempt to beat the average time of 136 days to complete a sale and move before Christmas.
This month also marks 20 years since the first Rightmove House Price Index was published.
Over that time national average asking prices have more than doubled (+134%) from £155,994 to £365,173.
Average salaries have grown by 76% and the Retail Price Index has increased by 93% in the same period, so house prices have been outstripping both salaries and general inflation over those 20 years.
Tim Bannister, Rightmove’s director of property science, said: “A drop in asking prices is to be expected this month, as the market returns towards normal seasonal patterns after a frenzied two years, and many would-be home movers become distracted by the summer holidays. Indeed, for those that can, this may be their first summer holiday abroad since before the pandemic.
“Sellers who want or need to move quickly at this time of year tend to price competitively in order to find a suitable buyer fast, with some hoping to complete their move in time to enjoy Christmas in a new home.
“To achieve that this year, they’d need to beat the current average time between accepting an offer and completing the sale of four and a half months.
“Nevertheless, we’re still expecting price changes for the rest of the year to continue to follow the usual seasonal pattern, which means we’ll end year at around 7% annual growth, even with the wider economic uncertainty.”
The sixth consecutive interest rate rise, this time by 0.5% to 1.75%, will no doubt be in the minds of many would-be home-movers.
That in mind buyer demand this month is down 4% on the frenzied market of 2021, but still some 20% higher than in 2019.
The number of new listings coming to market is up 12% on the same period last year, though it is 6% down on 2019, while available homes for sale are down 39% in 2019.
Buyer enquiries to agents do not appear to have been particularly dented by the most recent interest rate rise, suggesting that many buyers are still committed to moving, and incorporating rate rises into their financial planning.
A combination of rising house prices and interest rates means that average monthly mortgage payments for new first-time buyers putting down a 10% deposit have now exceeded £1,000 for the first time, to reach £1,032.
This is 27% higher than at the start of the year. Despite this challenge, demand for properties in the typical first-time buyer sector is 32% higher than at this time in 2019.
Bannister added: “Several indicators point to activity in the market continuing to cool from the lofty heights of the last two years.
“It’s likely that the impact of interest rate rises will gradually filter through during the rest of the year, but right now the data shows that they are not having a significant impact on the number of people wanting to move.
“Demand has eased a degree and there is now more choice for buyers, but the two remain at odds and the size of this imbalance will prevent major price falls this year.
“For those looking to move who are concerned about interest rate rises, it’s important that they get a mortgage in principle early on in their moving journey to understand what they could afford to borrow, and find out about the rates available to them to assess what they are able to repay each month.”
Reaction
Jordan Yorath, partner at Monroe Estate Agents in Leeds:
“So far in August, we have been advising some clients in the higher value property sector to market their home outside of the traditional summer holiday period.
“After a prolonged period where many people’s lives were restricted in terms of holidays and travel, we felt best that clients seek to launch their properties outside of the month of August in particular, so that they could reach the maximum number of engaged buyers when they come to market.
“July was a really strong month for us, and while some might be enjoying a summer break away, we have been busy preparing for the rest of the year, with a great number of listings also ready for September onwards.”
Josephine Ashby, managing partner of John Bray Estate Agents in Rock, North Cornwall:
“After a very strong two years for coastal hotspots, we are just starting to see things ease a little in line with the uncertain political and economic climates.
“That said, levels of interest remain very strong despite this and with more supply coming to the market, it feels like we are returning to a more traditional balance, with sensible conversations about choice and value rather than the frenzied bun fight we experienced during the pandemic.
“We have seen values rise over 15-20% in North Cornwall and going forward this growth will slow. In the very prime areas however, values tend to stabilize and vendors who don’t need to sell simply wait for the best time. We are still finding that the very top of the market is performing exceptionally well.”
Tomer Aboody, director of property lender MT Finance:
“Higher interest rates mean buyers are understandably hesitant about committing to a purchase until calmness is restored. This could take time, although some are taking advantage of the uncertainty, especially those who have a mortgage approved and need to complete.
“While a slowdown in the housing market is inevitable, everyone will have to adapt to the new norm of higher rates. The government could look to assist with a restructure of stamp duty helping facilitate transactions and getting the market moving in the right direction.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“Concerns about rising mortgage payments and inflation are outweighing savings from cuts in stamp duty and other taxes – particularly for first-time buyers. However, some momentum should be maintained as buyers seek to take advantage of current rates before they rise even higher.
“Listings are up a little and buyer enquiries down so some prices are softening, especially in areas such as London where affordability is more stretched. However, on the whole, prices continue to be supported by record low unemployment, shortage of stock and recent stamp duty reductions.
“Risks are greater now but the market has proved its resilience in the past so we wait to see whether recent political changes can bring some much-needed economic and market stability.”
Philip Dragoumis, owner of London-based wealth manager, Thera Wealth Management:
“Jeremy Hunt’s comments over the weekend as well as Monday’s planned announcements signal the mother of all U-turns on the mini-Budget.
“There is also the expectation of more fiscal measures to come over and above the U-turns.
“This has been timed to coincide with the end of the Bank of England’s bond buying programme and it seems to be working.
“Sterling was rallying strongly Monday morning and bonds were up. A Truss resignation and more “adults in the room” will also be welcomed by markets.”
Wes Wilkes, CEO at wealth managers IronMarket:
“I don’t believe the current administration have any idea what they’re doing. What’s more, they and the Bank of England aren’t the ones that will decide whether the stability is real or not, the markets will.
“Sterling seems a tad stronger overnight but the Gilt selling was strong on Friday. I fear lasting damage to a country that is a net borrower. Welcome to an emerging market economy.”
Riz Malik, director of Southend-on-Sea-based R3 Mortgages:
“The Bank of England’s operations over the past week or two have not led to an increase in the resilience of the gilts market. They have led to the survival of that market.
“As the lender of last resort and with their function to maintain market stability, this may not be their last intervention. They may be called upon again to clean up this hapless Government’s mess.”
Kay Westgarth, head of sales at Standard Life Home Finance:
“It’s reassuring to see that despite an increasingly complex market, house prices have remained relatively robust.
“However, as time passes, it is clear house price growth will be impacted, as five consecutive interest rate changes and the turmoil following the mini budget take effect.
“No one has a crystal ball so while advisers understand the factors that drive the market, accurately predicting exactly what will happen in future is tough.
“Instead, this is where advisers can really add value to a transaction by helping clients to understand and explore all the extensive options available to them to help them find the right path for their individual circumstances at the current time.
“The long-term drivers for the later life lending sector and the UK residential property market are good, so the focus needs to be on supporting people during the current turmoil.”
Vikki Jefferies, proposition director at PRIMIS:
“Although we’ve seen the rate of house price growth slow, the housing market has shown its ability to weather ongoing economic issues.
“Now, more than ever, support from brokers will be critical to customers in need of guidance in the face of rising mortgage rates.
“As many consumers have to deal with increasingly complex personal financial situations, brokers need to be prepared to offer tailored advice to ensure that homeowners are aware of the options available to them.”
Kate Davies, executive director, IMLA:
“It’s important to note that today’s house price data from Rightmove is reporting on a month of two very different halves – pre-and post the “fiscal event” which caused so much damage to financial markets.
“A number of commentators have predicted significant falls in house prices – perhaps as much as 20% – while others take a longer-term view, pointing out that prices have been rising ahead of wages and inflation for a considerable period, such that much of the housing stock is currently over-valued. Allowing it to settle back to something closer to “normal” may be a good thing – although it will need to happen gradually in order to avoid further stagnation in sales and problems for existing home owners who may wish to sell and find themselves in negative equity. The imbalance between supply and demand will continue to support prices – and long-term data shows us that property remains a reliable long-term investment.
“We continue to miss the annual target of building 300,000 new dwellings a year – first promised by Winston Churchill, no less – and repeated on numerous occasions by ambitious politicians. The fall-out from the Truss Government’s disastrous “fiscal event” is likely to have continued repercussions for the mortgage market for months to come – and this will hit first-time buyers particularly hard, as loans become more expensive. At the same time, the rising cost of living will make it harder to save for a deposit – putting the goal of home ownership way out of scope for many in the foreseeable future. The withdrawal of the Help to Buy scheme will mean that there is no significant Government support for first-time buyers: alternative schemes are being developed but these cannot yet deliver the volume needed to replace HTB.
“Lenders will re-price their products and will continue to support borrowers – but the figures are likely to look quite different for some time to come – the era of sub-1% mortgages has gone and we are going to have to get used to a new “normal”.
