House prices continue to rise despite a drop in interest from buyers, say Rics estate agents – but they expect the rate of sales to continue to slow
- New buyer interest fell for third month in a row, dropping by nearly a third
- Experts say a general election would exacerbate the situation
- Demand for rental properties continued to far outstrip listings pushing up rents
- London, North and Northern Ireland were only areas to see rise in buyer demand
Lack of housing stock continues to drive the rise in house prices despite a fall in demand, according to Royal Institution of Chartered Surveyors estate agents.
Despite new buyer interest falling for the third successive month, down nearly a third (27 per cent), house prices have continued to rise in June.
Almost two thirds (65 per cent) of respondents to the survey reported an increase in house prices. This was down from the April high of 78 per cent but well above the long-range average of 13 per cent.
The slowdown in property listings is driving up house prices despite a fall in demand from buyers, according to Rics estate agents
Tom Bill, head of UK residential research at Knight Frank said: ‘Mortgage offers made on more favourable terms earlier this year will begin to expire in coming months, meaning buyers may have to reassess their plans.
‘Combined with economic news that is going to get worse before it gets better, and the fact supply is rebuilding, downwards pressure on house prices will intensify after the summer.
‘In the unlikely event of a general election this year, both activity and price growth would slow further.’
Despite economic headwinds, 65% of agents reported a rise in house prices in the past month
And the fall in interest is translating into a drop in sales. Some 13 per cent of respondents said they had seen a fall in newly agreed sales and, as they look ahead, 9 per cent expected transaction numbers to continue to fall over the next three months.
RICS Chief Economist, Simon Rubinsohn, said: ‘Although buyer enquiries have predictably slipped a little of late, this needs to be placed in the context of the healthy level of demand in previous months.’
And even with the rise in house prices, sales prices continue to outstrip asking prices. Half of survey participants said that average sales prices were coming in above asking prices for properties listed at up to £500k.
For properties priced between £500k and £1m, 39 per cent said they were seeing the sales price beat the asking price. However, the most expensive homes priced over £1 million were coming in slightly under the asking price.
Only London, Northern Ireland and the North of England saw increased buyer. demand last month.
Christopher Ames, a Rics estate agent based in London said: ‘There is still a shortage of overseas purchasers willing or able to come to London to view properties.
‘The home demand is thus more dominant but more aware of rising fuel prices and interest rates. The Autumn market could well be more of a buyer’s market.’
Buyers’ market: Agents say economic headwinds could swing the balance in buyers’ favour
Rents continue to rise
In the letting market, the continued imbalance between supply and demand continues to push up rents.
Over the past month, 36 per cent of respondents said they saw an increase in tenant demand, but 11 per cent saw a fall in the number of new landlord instructions.
And half expected rents to rise in the coming months.
Rubinsohn commented on the rental findings: ‘A probably even more striking aspect of the latest report is the concern being voiced about the rental market.
‘A combination of a lack of social housing development allied to more onerous changes in the private lettings market is exacerbating the imbalance between demand and supply leaving the rent expectations metric pointing to further strong growth in the midst of the worsening cost of living crisis.’
Based in Upminster David Parish from estate agents Gates, Parish & Co’s added: ‘There is a shortage of new instructions at present. Properties that are available are letting quite quickly.
‘The government’s proposals for the private rental sector are ill thought out and if implemented will reduce the availability of privately rented properties.’
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