18 July 2023 – Despite house prices having fallen slightly in July compared to June, the average asking price is still 2.6% higher this month than at the start of the year.
Rightmove’s latest House Price Index shows that property prices have fallen by 0.2% or £905 in July compared to June. Normally, property prices are stable at this time of year.
This indicates that the recent rises in mortgage rates are starting to impact on the market, with sellers adapting their expectations to the current situation.
Year on year, asking prices have increased by 0.5%, which is the lowest annual growth since November 2019. However, the property portal said that average house prices have still risen by 2.6% compared to January this year.
12% Fewer Sales Agreed In June Compared To 2019
The slight fall in the average house price this month is a result of rising mortgage costs, with average fixed-rate mortgages exceeding 6%.
This is also evident in the reduced market activity. According to Rightmove‘s latest House Price Index, the number of sales agreed were 12% lower in June than in the same period in 2019.
While the market performed surprisingly strong in the first five months of this year, it appears that high interest rates and stubbornly high inflation are beginning to have an effect on the housing market.
Properties with higher value, which Rightmove terms second-stepper and top of the ladder sectors, have been affected more. For these two sectors the number of sales agreed is 14% lower than in 2019.
This seems to indicate that movers who are planning to move up the property ladder and are likely to increase their mortgage doing so, are delaying their move until there is more certainty about mortgage rates.
The first time buyer sector is faring better, with the number of sales agreed in this category only 9% below 2019 levels. First-time buyers seem more determined than ever to get onto the property ladder, despite affordability getting worse.
They have a strong motivation to buy with rents at a record-high, which have been rising sharply in the past year. A lack of supply has been blamed for soaring rent prices.
Buyer Demand Up By 3%
Despite the decrease in the average asking price this month and number of sales agreed, buyer demand was 3% higher than in the same period of time in 2019.
First-time buyers, trader-uppers and downsizers are all still keen to make the move. But it seems clear that these buyers won’t go for overpriced properties.
Rightmove’s data shows that sellers who put their home on the market with a realistic price are more likely to sell their home.
Sellers who price right the first time, rather than starting with too high an asking price only to reduce later, have a much better chance of attracting one of these motivated buyers, and a good local agent will provide sellers with accurate evidence of prices that are being achieved in their area.
Tim Bannister, Director of Property Science at Rightmove
The property’s portal research has shown that sellers who put their home up for sale at too high a price and then reduce it later are less likely to sell their home. In fact, Rightmove calculated that these properties are more than 10% less likely to find a buyer.
Even though fewer sales are agreed, the number of properties on the market is still 12% lower than at the same time in 2019.
Rising Mortgage Cost Impacting On Homeowners
While many first-time buyers are still determined to get onto the housing ladder, many homeowners with a mortgage are struggling to pay their monthly payments.
According to analysis by the Office for National Statistics, 27% of borrowers have seen their repayments increase in the past month. Furthermore, the data shows that 28% of mortgage holders are struggling to keep up with their mortgage payments.
While this figure is already relatively high, it suggests there are still a lot of people who are shielded by previous fixed rate mortgage deals. As more people’s deals run out and they are faced with the prospect of drastically higher rates, we can expect this figure to increase significantly.
Karen Noye, Mortgage Expert at Quilter
The Bank of England has reported that mortgage defaults are at the highest level this week since 2009. This is worrying for the housing market, as it could lead to homeowners being forced to sell their home at a lower price.
This would then put a downward pressure on the average asking price which could lead to a sharp fall in house prices.
Jonathan Rolande from the National Association of Property Buyers warns that house prices could fall by 5% by Christmas. At the same time he believes that the number of transactions will also slow down further.
Wether this prediction is correct or not is difficult to say, only time will tell. But even if so, it is good to keep in mind that property prices have risen over 20% in the past three years.
