A pedestrian crosses Tower Bridge in view of skyscrapers on the skyline of London. — Bloomberg
LONDON: Property sellers in the United Kongdom cut their asking prices for the first time this year.
That is clear indication that a sharp jump in borrowing costs is cutting into what buyers can afford to pay.
The property-search portal Rightmove said its measure of asking prices fell 0.2% this month after little change in June.
Prices nationwide are still 0.5% above where they were a year ago and have risen steadily since December.
The figures confirm a trend towards lower prices that mortgage lenders have reported and suggest that home sellers are beginning to pare back expectations for how much they can get.
If that sentiment takes hold, it could fuel deeper declines in the market, which has so far defied forecasts for a collapse.
“The interest-rate brakes being applied more strongly to slow the economy are now beginning to bite in the housing market,” Tim Bannister, Rightmove’s director of property science, said in a report yesterday.
“The surprise of further mortgage rate rises, when many felt that they had stabilised, contributed to the fall in prices and a number of sales agreed,” the Rightmove director said
The Bank of England has lifted its benchmark lending rate sharply in response to inflation that’s taking longer to come down than in most of the Group of Seven nations.
Mortgage rates have risen, and UK banks have pared back mortgage availability as they predict more defaults.
Rightmove estimates a five-year fixed-rate, 85% loan-to-value mortgage at 5.69%, which is almost 0.49 of a point higher than in June.It listed the average price as £371,907 (US$487,630 or RM2.2mil), down £905 (RM5,363) in the month. Prices fell by £82 (RM486) in June, which was the first drop for that month since 2017.
They fell more sharply in November and December, traditionally a period when sellers slash prices to complete deals by the end of the year.
“The market appears to be normalising to pre-Covid levels, where most have time to think and make decisions,” said Hannah Towers, an agency partner at Armistead Barnet LLP in Lancashire.
For now, a distinct shortage of properties up for sale is helping support home prices, Towers said.
Rightmove said its measure of houses for sale was 12% below where it was in 2019. Buyer demand, meanwhile, was “resilient”, 3% higher than in 2019.
“While there’s not the level of demand that there was this time last year, the pool of buyers that remain is serious and ready to move with their mortgage in principle,” said Steph Walker, chief operating officer at The Agency UK.
There’s still robust interest in buying from some segments of the market, especially people who are less reliant on borrowing to finance the deal.
“First-time buyers, trader-uppers and downsizers with higher deposits and lower mortgage requirements appear to be still keenly searching the market.
“They do not want to miss out on the right property that is not overpriced and that they feel they can still afford,” Bannister said.
Regionally, prices increased in the month in London, the East Midlands, Yorkshire and Humber and the southwest. They fell in the southeast. — Bloomberg
