Oversupply in the UK property market is creating growing downward pressure on prices, according to Home.co.uk’s latest House Price Index.
The report warns that even the previously resilient northern regions are now registering sub-inflation growth, with investment demand weakening as real-terms capital gains turn negative and rents begin to slide.
Home.co.uk notes that wider economic pressures are compounding the slowdown. Rising unemployment and expectations of tax increases in the forthcoming November Budget are expected to reduce the number of active buyers and constrain affordability.
The report suggests the market is already adjusting, with price and rent reductions anticipated in the months ahead.
Although the adjustment is gradual, the data shows that sub-inflation price growth is steadily eroding real values without triggering negative equity or distressed debt.
Investor sentiment has turned more cautious, with growing numbers bringing properties to market.
October saw the highest level of new instructions for that month in many years, with listing volumes up 7% year on year.
The largest increases were recorded in the East Midlands, Wales and the West Midlands, each up 11%.
The mix-adjusted average asking price for England and Wales fell by 0.4% in October, reducing annualised growth to 0.4%.
The North East and Yorkshire recorded the largest month-on-month declines.
Annualised home price growth across all regions continues to lag far behind inflation, with overall real growth estimated at around -4.2%.
Yorkshire remains the strongest regional performer with a year-on-year rise of 3.2%, while the South West recorded the weakest performance with a fall of 1.3%.
According to Home.co.uk market momentum has weakened sharply since the summer, with unsold stock at its highest November level since 2013.
The typical time on market for unsold homes is now eight days longer than a year ago. Asking rents have also deteriorated further, with annualised national rental growth falling to -3.7%.
All English regions, Scotland and Wales reported year-on-year declines, with Wales recording the steepest fall at 11.6%.
The report highlights growing budget uncertainty as another drag on activity. A cut to the Bank of England base rate is now priced into the 2-year swap rate and could coincide with the MPC’s December meeting.
However, with inflation still above target, Home.co.uk expects any reduction to be minimal. The Chancellor has signalled higher taxes on wealthier households, with potential reforms to inheritance tax, capital gains tax, property tax and pensions under discussion.
