House prices fell again in January with every region seeing price falls – with the worst drops being seen in the East Midlands and South East, according to the latest Royal Institution of Chartered Surveyors (RICS) UK Residential Survey.
It found that the number of buyers and sellers dropped in January, along with agreed sales.
Its house price balance, which shows the difference between the number of surveyors seeing rises and falls in prices, dropped to -47 the lowest level seen since April 2009 and down from -42 in December.
Looking at the next 12 months the sales outlook has improved with the net balance improving significantly to -20% compared to -42% seen in December.
The survey also revealed that landlords are continuing to sell up, while the number of tenants rose again.
Simon Rubinsohn, chief economist at RICS, said: “Although some respondents to the January RICS survey have noted a little more interest in the housing market as the new year got underway, the overall tone of the feedback still remains subdued which is not altogether surprising given the jump in mortgage rates since the autumn.
“Prices, meanwhile, are now beginning to reflect the shift in balance between demand and supply.
“However, it is questionable how much downside to pricing there is likely to be given that recent macro forecasts from the Bank of England and others are now envisaging a less harsh economic environment this year.
“Meanwhile the rental market continues to show strong interest from tenants and limited stock available which is keeping a firm momentum to rental growth.
“While Build to Rent clearly has a role to play in helping to fill this gap, the insights from the latest survey suggest that this is not going to be sufficient, at least in the near term, to address the challenge in this market.”
Reaction
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown:
“January was deathly for the property market. Despite falling mortgage rates, buyers and sellers gave up the ghost, with buyer numbers continuing to fade for the 9th month in a row. Meanwhile, house prices declined for the fourth consecutive month – and the proportion of agents reporting house price falls rose again.
The RICS report is different from other indices, because it measures the price of homes among sales being agreed that month – so there’s not the usual lag for three months or more while we wait for these to translate into property completions. RICS first noted price drops in its October report, which are likely to be reflected in the January or February figures from the ONS. The most recent RICS data indicates that we can expect a steady flow of bad news about house prices well into the spring.
“Estate agents aren’t convinced the picture will change in a hurry. They expect the market to stay quiet and for prices to keep declining, as buyers get to grips with higher mortgage rates and the prospect of a falling market.
“However, the degree of pessimism appears to be easing slightly. Since the horrors unleashed by the mini-Budget, the reversal of an awful lot of measures means the market is forecasting lower rates than it was. As a result, fixed rate mortgages have been getting cheaper.
“The most competitive 5-year fix is now below 4% for the first time since October. Meanwhile, the Bank of England is forecasting that any coming recession could be shallower and shorter than had been expected – and we’ve had the first forecast that it may not materialise at all. Agents are increasingly hopeful that a combination of the two could persuade buyers to return.
“There’s always the risk that this optimism is misplaced. It remains to be seen much damage has been done to buyer confidence during the past few months, and how the health of the market will hold up if the official figures feed us a monthly dose of misery.”
Tomer Aboody, director of property lender MT Finance:
“With rising costs, rising interest rates and an overall reduction in consumer ability to spend, recent months have been a time of caution as buyers and sellers wait for slightly more stability in the market.
“With Rishi Sunak’s ambitious plan of halving inflation this year, along with swap rates falling to around 3.5%, consumer sentiment could sway towards a more positive outlook. That said, borrowers will still be required to be more realistic and pragmatic with their purchases, to ensure they don’t overextend themselves in this higher-rate environment.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“There’s no doubt that demand is not what it was just a few months ago following sharp rises in interest rates and lives costs particularly.
“However, on the ground, we’ve noticed more need to, rather than want to, move buyers as mortgage repayment and job prospects become less daunting than previously envisaged.
“There is some serious haggling underway but we’ve seen a softening in prices rather than a correction while supply is slowly improving. Reduced competition means transaction numbers are down, taking longer and are more fragile.”
