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UK house prices to fall in 2023 amid rising mortgage rates – RICS

Estate agent signs for 'Kinleigh Folkard & Hayward' and 'Wooster & Stock' stand outisde period residential homes in a south London street, on 6th October 2022, in London, England. (Photo by Richard Baker / In Pictures via Getty Images)
UK house prices fell in the South East of England, and East Anglia, but rose in some parts of the UK. Photo: Richard Baker/ Getty

UK house prices ground to a halt last month, after more than two years of growth, as rising mortgage rates deterred buyers from the market.

According to the Royal Institution of Chartered Surveyors (RICS) on Thursday, a net balance of 2% of property professionals reported house prices were falling across the UK as a whole, rather than rising.

This stall ended a sequence of positive readings running for 28 months in a row.

Prices fell in the South East of England, and East Anglia, but rose in some parts of the UK. Property professionals based in Scotland and Northern Ireland reported an upward trend in house prices despite the pace of growth being softer than earlier in the year.

Agents are now expecting prices to drop over the coming year, while RICS added that rents are expected to continue heading higher amid an imbalance between demand from tenants and the supply of homes to let.

Read more: Will stamp duty cut push UK house prices up even further?

Tenant demand continued to rise at a solid pace, with a net balance of 46% of survey participants noting an increase. Rents are expected to be around 4% higher in a year’s time.

It comes as new buyer inquiries fell for the sixth month in a row in October, while survey feedback on buyer demand was negative across Britain.

The average time from listing to completion also hit 18 weeks – up from 16 weeks a year ago

“The latest feedback to the RICS survey provides further evidence of buyer caution in the face of the sharp rise in mortgage costs,” Simon Rubinsohn, RICS’ chief economist, said.

“As a result, the volume of activity is likely to slip back over the coming months and realistic pricing is now much more important to complete a sale.

“The settling down in financial markets could provide some relief although it may be premature to assume this will be reflected in a reduction in lending rates any time soon.”

Watch: How does inflation affect interest rates?

He added: “However, the employment picture remains critical to the medium-term outlook and for the time being, that remains solid.

“As far as the lettings market is concerned, the imbalance between demand and supply still appears unusually extended, leading to rent expectations in the survey remaining at elevated levels and it is difficult to see this changing any time soon in the current environment.”

The findings were released as property website Rightmove said it was launching an Ofqual-regulated qualification for estate and letting agents.

Rightmove said the launch of the certificate for estate and letting agents (CELA) followed requests from agents to give their teams a way that their ongoing learning can be recognised through an official qualification.

Read more: Interest rates: How BoE's rate hike will impact mortgages and house prices

Estate agents also pointed to Kwasi Kwarteng’s chaotic mini-budget in September for adding to the slowdown.

One estate agent said in the latest report: “The market slowed dramatically in October following the mini-budget bombshell but there were signs it was slowing before this.”

Meanwhile, Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “Even naturally optimistic estate agents are starting to think that the writing is on the wall for house prices. The chaos in the mortgage market in the aftermath of the mini budget has been devastating, and the looming recession is likely to take an even bigger toll,”

“Mortgage rates have since dropped back slightly, and the Bank of England has been keen to emphasise that inflation is nearing the peak, so rate rises may not need to be so big or so numerous in future.

“However, they also warned of a two-year recession looming, which is going to dent buyer confidence even further. The risk of your mortgage rate rising and becoming incredibly difficult to afford is bad enough, but the risk of losing your job and not being able to afford it at all is horrendous.

“Buyers and sellers have decided now is not the time to take the plunge, and have packed up and gone home.”

Watch: Will UK house prices ever fall?