Home prices stalled last month after more than two years of growth as a sharp rise in mortgage rates sparked caution among buyers, according to Britain’s official surveyor.
The Royal Institution of Chartered Surveyors (Rics) has also forecast that rents will be 4% higher within a year due to the imbalance between strong tenant demand and the supply of homes.
Across the UK, 2% more property professionals report that house prices are down rather than rising, Rex said, ending 28 months of growth readings.
However, there was some regional variation in price trends. And while prices were trending lower in areas such as East Anglia and southeast England, surveyors said there was still an upward trend in Scotland and Northern Ireland, although the pace of growth was slower than it was earlier this year.
New buyer inquiries fell for the sixth straight month in October, and survey feedback on buyer demand was negative across the UK. It now takes an average of 18 weeks to sell a property, up from 16 weeks a year ago.
Simon Robinson, chief economist at Rics, said: “The latest feedback on the Rics survey provides further evidence of buyer caution in the face of a sharp rise in mortgage costs.
As a result, the volume of activity is likely to decline again over the coming months, and realistic pricing is now even more important to finalize the sale.
“Stability in financial markets could provide some relief although it may be too early to assume that this will be reflected in lower lending rates anytime soon.”
“With regard to the rental market, the imbalance between demand and supply continues to appear extraordinarily prolonged, with the result that rent expectations in the survey remain at elevated levels and it is difficult to see this change any time soon,” Robinson added.
Tom Bell, Head of UK Residential Research at real estate agent Knight Frank, said:
As the mini-budgeting effect wears off, mortgage rates will cool down before they stabilize. The downward pressure on prices will decrease somewhat as the economic and political background becomes less confusing.
“However, after 25% growth during the pandemic, we think it is reasonable that home prices may have peaked now.”
It comes amid renewed evidence that the property market is in the doldrums after Taylor Wimpey said he will build fewer homes this year than originally planned, citing a drop in sales and a sharp increase in the cancellation rate to 24% in the past six months, Up from 14% in the previous year.
A day earlier, rival Persimmon also indicated a slowdown in demand as sales and prices of newly built homes fell and cancellation rates rose to 28%.