Buyer interest matches financial crisis lows: UK estate agents

UK estate agents said a jump in borrowing costs has cut inquiries by potential new home buyers for a sixth month, worsening the outlook for the property market.

The Royal Institution of Chartered Surveyors’ (RICS) index measuring sentiment from new buyers dropped to minus 55 per cent in October from minus 36 per cent the month before. That matched lows recorded during pandemic lockdowns and the financial crisis in 2008 and 2009.

“The volume of activity is likely to slip back over the coming months, and realistic pricing is now much more important to complete a sale,” said Simon Rubinsohn, RICS’s chief economist. “The settling down in financial markets could provide some relief.” 

The findings add to evidence that house prices are falling after budget measures introduced during Liz Truss’ brief spell as prime minister spooked investors and sent interest rates soaring in financial markets. While most of those measures have been reversed, mortgage rates remain near the highest in more than a decade.

Twelve-month price expectations among estate agents plummeted to minus 42 per cent in October from minus 18 per cent the month before, showing growing consensus that a downward recalibration of property prices is likely to be on the cards, RICS said. 

“Even naturally optimistic estate agents are starting to think the writing is on the wall for house prices,” said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown. “House prices have already stalled, and in some areas they’re falling.”

Northern Ireland and Scotland continued to be bright spots for house price growth, with RICS reporting a “reasonably firm upward trend” despite pull-backs in values elsewhere. 

The Bank of England (BOE) raised interest rates to 3 per cent on Nov 3 – a 14 year high and the largest single rate hike in over three decades. While the BOE governor Andrew Bailey said markets have priced in too many rate hikes, mortgage costs may linger at 4-5 per cent in coming years. 

“Sales are falling through and ‘new prices’ are appearing more and more,” said Vyv Wainwright, an estate agent based in Oakham. “Tough times ahead.”

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The time taken to complete sales also has increased to an average of 18 weeks in October, up from 16 weeks in the same month in 2021, indicating growing caution among buyers. 

Inactivity in sales continued to add momentum to the lettings market, with tenant demand rising further in October. Supply is not keeping pace with demand, with the RICS survey reporting that landlord instructions fell. That suggests rents will be driven higher in the coming months. BLOOMBERG