UK housing slowdown hits market confidence as asking prices fall | Housing market

Homeowners’ worries about falling house prices are affecting the national mood, according to a poll supported by a separate survey showing a small drop in asking prices.

Consumer confidence fell by 1.7 points to 101.6 in June, according to the YouGov/Centre for Economics and Business Research (CEBR) index, a reading that remains in positive territory. The biggest drag on the index was homeowners’ pessimism. Confidence in property values dropped by 5.8 points for the month and 10.3 points for the coming 12 months.

Sentiment had been knocked by the slew of negative economic news, said Kay Neufeld, the CEBR’s head of forecasting and thought leadership. Consumers trying to buy a house or remortgage at rates that have surpassed those in the aftermath of the mini-budget last year were particularly affected, she said, with the result that “unsurprisingly, the two house value indicators have taken the largest hit this month”.

The latest Rightmove house price index showed that the average asking price of a property coming on to the market in July declined by 0.2%, or £905, to £371,907. The monthly fall was slightly worse than the 0% norm for this time of year.

The run of base rate rises, the most recent of which took it to 5%, was starting to bite, the property website said. The number of sales agreed in June was 12% lower than the corresponding figure for 2019, in contrast with the better-than-expected start to the year.

Tim Bannister, Rightmove’s director of property science innovation, said: “The interest rate brakes being applied more strongly to slow the economy are now beginning to bite. The unexpectedly stubborn inflation figures and the surprise of further mortgage rate rises when many felt that they had stabilised have contributed to the fall in prices and number of sales agreed.”

However, Bannister said buyer demand remained resilient at 3% above the more normal market of 2019, buoyed up by a shortage of high-quality properties for sale and housing need. Sales of larger properties had suffered more as those who did not have to move reassessed their budgets, but demand for smaller homes with two bedrooms or fewer has been less affected.

Rightmove said this trend highlighted a continuing determination among many first-time buyers to navigate the unsettled mortgage market and get on to the property ladder, particularly with rents at record levels.

Chris Druce, a senior research analyst at Knight Frank, said the residential property market was as “price-sensitive as it’s been since before the pandemic” but he added that “deals are still being struck and pricing is proving resilient”. Nonetheless, the estate agency is forecasting that house prices will fall by 10% over this year and next as more fixed-rate mortgages are renewed at higher rates.