After experiencing a steep decline in August, asking prices for homes in Britain edged upwards this month, according to property website Rightmove.
The increase of 0.4% in average asking prices may seem modest, especially when compared to the sharp 1.9% drop in the preceding month, but Rightmove sees this as a sign that buyer affordability could improve in the near future.
Tim Bannister, director of property science at Rightmove, attributed the sluggish activity in August to the Bank of England’s 14 consecutive interest rate hikes.
He anticipates an increase in market activity in the coming autumn months, as conditions appear to be improving.
This observation is supported by the slight cooling of 2-year mortgage rates, which had earlier reached a 15-year high.
Contrary to Rightmove’s findings, mortgage lenders Halifax and Nationwide reported a decrease in selling prices in August. However, Bannister remains optimistic, stating that the autumn season will likely see a rebound in market activity.
Further affirming the cautious optimism, Rightmove noted a 7% decrease in the number of home sales compared to figures from 2019, before the pandemic began to distort the market.
Nonetheless, the first week of September witnessed a 12% increase in the number of homes available on the market, compared to an unusually low weekly average in August.
Reaction
Tomer Aboody, director of property lender MT Finance:
“With non-stop interest rates rises over the past 14 months, this lull is inevitable. The Government and Bank of England have forced the market into hibernation.
“Although August was subdued and activity down considerably compared with 2019, September has seen an uptick in transactions, with buyers concluding that the market will continue in this manner for a while so they need to bite the bullet and get on with moving. Thankfully mortgage rates are coming down, making buying more affordable.
“At some point the rate rises have to stop, allowing the market to breathe and take stock. This will, in turn, lead to a return of some confidence, which will translate into more transactions. Let’s hope this comes sooner rather than later.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“The only surprise for me is that the drop in prices is not larger.
“These are, of course, asking not selling prices but recent relentless rises in interest rates and fear of more to come have had an inevitable knock-on effect on present and future activity.
“We are finding in our offices that sellers with unrealistic expectations often end up not just with a lower price but have to accept below the level they were advised initially.
“Fortunately, in recent weeks, an expectation that interest rates may be at or near their peak coinciding with a return from summer holidays for many has prompted a welcome albeit modest uptick in appraisals, listings and buyer interest. This is particularly the case in those properties offered by motivated sellers.”
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“This isn’t a house price rise. It’s an indication of how desperate sellers are to defy the miserable realities of the housing market right now. Sky high mortgage rates mean demand has dropped like a stone, house prices have fallen, and sales have dried up. However, not all sellers are prepared to accept it right now – so asking prices are up over the past month.
“Reality lurks in the fact that over a third of people have chanced their arm by setting an overly optimistic asking price – and then been forced to cut it. An average drop of 6.2% highlights the gulf between optimism and reality.
“This mispricing is gumming up the works, so sales are sluggish – down around a fifth (18%) in a year. It means homes are taking 57 days to find a buyer, up from 35 in the same month a year earlier.
“It’s perfectly understandable. When we’ve seen prices rise so far and so fast, there’s the temptation to cling to the hope that they’ll keep doing so – at least until you’ve had the chance to sell. In reality, however, prices have turned, and if sellers don’t realise this up-front, they’re likely to sell for less in the end. They’ll waste the initial interest in their property, because buyers will baulk at the price. They’ll then have to cut – at least once – which buyers may read as off-putting levels of desperation. Being too optimistic can be an expensive mistake in a market like this one.”
