House prices fell across all regions in England last month, Rics says

House prices in the UK last month recorded their most frequent declines in 13 years as buyer demand and sales activity contracted more than expected in the face of higher borrowing costs and the risk of a recession, a closely monitored study has found.

The house price balance of the Royal Institution of Chartered Surveyors, which measures the difference between the percentage of surveyors who see rises and falls in house prices, fell to -42 in December, down from -26 the previous month.

The December figure was the lowest since October 2010, according to Reuters, and below the -30 economists had predicted.

Prices fell across all regions of England, according to the Rics, with East Anglia and the South East reporting the sharpest net declines.

Mark Hunter, of Grice and Hunter surveyors and brokers in Doncaster, said: ‘There is very little activity due to the seasonal downturn and we are waiting to see what happens from mid-January.’

Negotiated sales continued to fall in December, the Rics said, while new buyer inquiries fell marginally. The number of people putting their homes up for sale was also the lowest since September 2021, the Rics said.

Looking at the coming year, the balance for price expectations has fallen further from November.

Simon Rubinsohn, chief economist at the Rics, said; “The latest Rics Residential Survey highlights emerging challenges in the housing market as new buyers grapple with more expensive financing conditions and uncertainty about the outlook for the economy.

This is reflected in forward-looking Rics indicators around both prices and activity.

However, some signs of an easing of inflationary pressures in general may provide a glimmer of light, especially for those looking to take their first step up the property ladder.

“Meanwhile, feedback on the rental market once again shows the need for a concerted reflection on how to create a thriving sector that serves both the private and the ‘affordable’ tenant.”

Mortgage lenders, including Halifax and Nationwide, have both shown prices dropping monthly as inflation and rising interest rates pressure potential buyers.

Jeremy Leaf, a North London estate agent and former Rics residential chairman, said: ‘Activity in the housing market has slowed and sales are taking longer as buyers regain the balance of power, mainly due to the cost of living and interest rate rises.

“Prices may fall further before mortgage payments fall, despite recent modest cuts, as job security concerns mount.

“Lack of supply means prices are unlikely to fall sharply as we’ve found many buyers are waiting until early 2023 to see if mortgage rates have fallen before deciding to move.”

While property prices have reportedly fallen, rents are expected to continue to rise, the Rics said.

Demand in the rental market was set to slow further after falling to its lowest level in nearly two years last month, but fewer landlords were offering homes.

The Rics said: ‘Based on this, near-term expectations continue to point to higher rents, with the net balance of respondents expecting rent growth to remain unchanged from last month at +42 percent.’

Price shifts: House prices fell in every region in England last month, according to the RICS

Make Inquiries: The number of new inquiries from potential buyers has dropped slightly over the past month

According to the RICS, one of the fundamental challenges in the housing sector is the persistent lack of high quality affordable housing. It said: ‘This inadequate housing supply has a direct correlation to property prices, rents and quality – posing wider economic and social challenges.’

On Wednesday, figures from the Office for National Statistics showed average house prices in the UK rose by 10.3 per cent in the year to November 2022, up from 12.4 per cent in October 2022.

The median house price in the UK was £295,000 in November 2022, which is £28,000 higher than at the same point a year earlier, but a slight drop from the previous month’s record £296,000.

Lenders reported that demand for secured loans for home purchases fell in the fourth quarter of 2022 and is expected to fall further in the current quarter, according to the Bank of England in its latest survey of credit conditions published today.

Some households could find it more difficult to get a mortgage and other types of credit in the coming months, while lenders expect more loans to default.

Kylie-Ann Gatecliffe, a director of Selby-based brokerage, KAG Financial, said: ‘One concern is that lenders expect mortgage availability to decline in the next quarter.’