UK house price growth slows to its weakest since July 2020

British house prices rose at the slowest pace since early in the coronavirus crisis last month, with rising mortgage rates starting to bite. 

Enquiries by new buyers fell for a fifth month in row and expectations for the year ahead suggest a slight fall in prices, according to the Royal Institution of Chartered Surveyors’ (RICS) monthly survey.

The RICS house price balance – measuring the difference between the percentage of surveyors reporting price rises and those seeing a fall – fell sharply to +32 in September from +51 in August, signalling a slowdown in price growth.

British house prices rose last month at their slowest pace since early in the coronavirus crisis and they look on course to fall as a surge in mortgage costs adds to uncertainty about the economy for home-buyers, a survey showed on Thursday

The findings sent a number of housebuilder share prices lower on Thursday morning, with Taylor Wimpey down 4.66 per cent trading at 82.37p and Berekley Group down 0.28 per cent trading at 3,181.00p.

September’s reading was the weakest since July 2020, and a separate balance for sales volumes was the most negative since May 2020, the figures showed.

Experts highlighted rising interest rates and an uncertain macro picture as having taken a toll on the market, with the expected jump in mortgage rates over the coming six months anticipated to outweigh any potential boost from the cut to Stamp Duty.

New instructions to sell also continued to fall, with stock levels remaining at historic lows. 

According to the findings, estate agents are holding an average of just 34 residential properties on their books, and the pipeline appears to have deteriorated further, with the net balance for new market appraisals dropping to -20 per cent (down from -3 per cent in August). 

RICS’s chief economist Simon Rubinsohn said: ‘Even though the headline price balance remains in positive territory for now, storm clouds are visible in the deterioration of near term expectations for both pricing and sales. Looking further out, the picture portrayed by the RICS survey has clearly shifted in a negative direction.’

After booming during and after the COVID-19 lockdowns as home-owners sought bigger properties, Britain’s housing market has cooled recently

‘How this plays out in terms of hard data will inevitably depend in part on the state of the mortgage market once it settles down, but it is difficult not to envisage further pressure on the housing sector as the economy adjusts to higher interest rates and the tight labour market begins to reverse.’

After booming during and after the Covid-19 lockdowns as homeowners sought bigger properties, Britain’s housing market has cooled recently.

Mortgage lender Halifax has reported falling prices, in month-on-month terms, in two of the last three months. Rival lender Nationwide says British house prices failed to rise in monthly terms for the first time since July 2021 in September.

The Bank of England has raised borrowing costs from 0.1 per cent in December 2021 to 2.25 per cent now. 

Investors are betting on a full percentage-point increase at the BoE’s next policy announcement on 3 November as it tries to get a grip on inflation, which could be pushed higher by the tax cut plans of Britain’s new government.

A surge in borrowing costs in financial markets, fuelled by concerns among investors over the extra borrowing implied by the government’s plans, has pushed mortgage rates sharply higher.

Rubinsohn said the mortgage market had yet to settle ‘but it is difficult not to envisage further pressure on the housing sector as the economy adjusts to higher interest rates and the tight labour market begins to reverse’.

A recent cut to Britain’s stamp duty tax on property purchases, part of finance minister Kwasi Kwarteng’s package of tax cuts, was set to be outweighed by the rise in mortgage costs, RICS said. 

In the lettings market, tenant demand picked-up alongside a fall in landlord instructions. 

As a result, RICS said near-term expectations point to further strong growth in rental prices over the coming three months. 

This post first appeared on Dailymail.co.uk