A lack of homes coming to the market is continuing to drive up house prices despite a slowdown in demand from buyers, according to estate agents. 

Enquiries from potential buyers fell 25 per cent in July compared to the same time last year according to the Rics UK Residential Survey, which takes in the views of agents and chartered surveyors. 

However, buyer interest ticked up slightly from June which saw a 27 per cent fall in enquiries year-on-year. 

It is the third successive report in which demand has fallen, and the expectation is that it will continue to decline.

Buyer interest fell 25% in July with agreed sales for the month dropping 13% compared to 2021.

Buyer interest fell 25% in July with agreed sales for the month dropping 13% compared to 2021.

Buyer interest fell 25% in July with agreed sales for the month dropping 13% compared to 2021.

The reduction in interest has translated to a fall in sales volumes over the month, but Rics said it was yet to drive down prices. 

Agreed sales were down 13 per cent compared to the same time last year.

The slowdown in demand follows rising mortgage rates and general economic uncertainty. 

Last week the Bank of England announced a 0.5 per cent increase in its base rate to 1.75 per cent – the biggest rise in 27 years – pushing up rates on new fixed mortgages even further.

Since January 2022, interest on a typical two-year fixed mortgage has jumped from 1.3 per cent to 3.46 per cent, according to analysis from L&C Mortgages, increasing average monthly payments by around £159.

The rise prompted a surge in demand for mortgage brokers, as would-be buyers tried to lock-in lower mortgage rates before lenders priced in the increase.  

But despite the rising costs 63 per cent of Rics’ survey respondents reported an increase in house prices during July, broadly unchanged from 65 per cent in June. 

The only slight indication of a slowdown in price growth is the fall from the April high of 78 per cent reporting an increase.

Still rising: House prices continue to increase, according to 63% of Rics estate agents

Still rising: House prices continue to increase, according to 63% of Rics estate agents

Still rising: House prices continue to increase, according to 63% of Rics estate agents

Tarrant Parsons, senior economist at Rics said: ‘Amid a backdrop of sharply rising living costs, slowing economic growth and higher interest rates, it is little surprise that housing market activity is now losing some momentum.

‘With monetary policy set to be tightened further over the coming months, sales expectations point to a further softening in transaction volumes going forward. Nevertheless, with respect to house prices, limited supply available is still seen as a crucial factor underpinning the market. 

‘Although house price growth is likely to continue to ease, respondents still anticipate prices will be modestly higher than current levels in a year’s time.’

Cost of living ‘compromising’ chains from the bottom

While many people are still keen to move house, some property agents have raised concerns that the rising cost of living is beginning to affect the decisions of those at the bottom of chains, such as first-time buyers. 

Uncertainty among this group could have a knock-on effect on other home buyers. 

Jeremy Leaf, north London estate agent and a former Rics residential chairman, added: ‘We are finding at the sharp end that the desire to move is outweighing worries about continuing increases in interest rates and the cost of living.

‘On the other hand, those concerns are disproportionately affecting lower income households which is compromising the bottom of some chains, resulting in fewer and lengthier transactions.

‘Demand is supported in particular by lack of choice, low unemployment and rising rents so prices are still growing for now at least – albeit more slowly.’

Andrew Wishart at Capital Economics says that while housing supply is tight, it’s not enough to prop up prices forever.

‘With the new buyer enquiries balance still lower than the sales instructions balance, the survey remains consistent with prices falling by the end of the year,’ he adds.

Pole position: Wales saw the greatest number of sales per surveyor in the three months to end of July but Yorkshire and the Humber is set to take over in the longer term

Pole position: Wales saw the greatest number of sales per surveyor in the three months to end of July but Yorkshire and the Humber is set to take over in the longer term

Pole position: Wales saw the greatest number of sales per surveyor in the three months to end of July but Yorkshire and the Humber is set to take over in the longer term

Wales tops property sales table… for now

On a quarterly basis, Wales saw the biggest number of sales per surveyor but longer term Yorkshire and the Humber is expected to overtake as the region with the most activity.

Anthony Filice, director at Kelvin Francis estate agents in Wales, said: ‘There are more properties being listed, but they are taking longer to sell. The ‘feeding frenzy’ amongst buyers is receding. 

‘Buyers are taking more time and some are making offers on more than one property, before making a final decision. The situation coincides with the onset of the summer holidays.’

In the lettings market, tenant demand continues to rise across the UK with 36 per cent of agents surveyed by Rics reporting an increase in enquiries. 

However, 8 per cent of respondents noted a decline in new landlord instructions. Rics said that rents were expected to continue to rise sharply across all parts of the UK.

Best mortgage rates and how to find them

Mortgage rates have risen substantially as the Bank of England’s base rate has climbed rapidly.

If you are looking to buy your first home, move or remortgage, it’s important to get good independent mortgage advice from a broker who can help you find the best deal. 

To help our readers find the best mortgage, This is Money has partnered with independent fee-free broker L&C.

Our mortgage calculator powered by L&C can let you filter deals to see which ones suit your home’s value and level of deposit.

You can also compare different mortgage fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes, with monthly and total costs shown.

Use the tool at the link below to compare the best deals, factoring in both fees and rates. You can also start an application online in your own time and save it as you go along.

> Compare the best mortgage deals available now

This post first appeared on Dailymail.co.uk

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