Vendors are reducing their asking prices at the fastest rate in more than a decade, after the surge in interest rates dampened demand for property this summer.
The proportion of homes on the market which have had at least one price reduction is at its highest level since January 2011, Rightmove said.
According to the property portal, more than a third – 36% – of properties on the market have had their asking price reduced at least once, compared with the pre-pandemic average of 31.2%, as sellers tried to attract buyers.
This led to average price reductions of 6.2%, which was also the highest since January 2011, knocking more than £22,000 off average asking prices.
Tom Bill, head of UK residential research at Knight Frank, commented, “The bank rate is approaching its peak as the autumn season gets underway for the UK housing market, which is good timing. The bad news is that buyer confidence has been badly damaged by the volatility of the last 12 months.
“A strong jobs market, lender flexibility and the prevalence of fixed-rate deals in recent years will all curb price declines but stability is needed to improve sentiment, which is the all-important lubricant in the housing market. Even once rates peak, the adjustment to higher borrowing costs and the looming general election mean that we don’t expect a housing market firing on all cylinders. We don’t anticipate a cliff-edge moment for prices but a single-digit decline this year is likely to be repeated next year.”
Andy McHugo, director at McHugo Homes, said: “In almost twenty years of selling homes I feel that this summer and last summer have been the most subdued, perhaps due to the impact of not being able to travel in the summers of 2020 and 2021, but obviously with the current economic backdrop also.
“Encouragingly, since the start of September we’ve seen an upturn in enquiries as more home-owners have been motivated to step out into the market place, which should help translate into sales over the coming weeks and months.”
Jeremy Leaf, north London estate agent, commented: “The only surprise for me is that the drop in prices is not larger.
“These are, of course, asking not selling prices but recent relentless rises in interest rates and fear of more to come have had an inevitable knock-on effect on present and future activity.
“We are finding in our offices that sellers with unrealistic expectations often end up not just with a lower price but have to accept below the level they were advised initially.
“Fortunately, in recent weeks, an expectation that interest rates may be at or near their peak coinciding with a return from summer holidays for many has prompted a welcome albeit modest uptick in appraisals, listings and buyer interest. This is particularly the case in those properties offered by motivated sellers.”
Adam Feather, managing director of Robert Anthony Estate Agents, said: “With fewer properties changing hands, as increasing mortgage borrowing costs put greater pressure on people’s finances, house prices will almost certainly fall further over the next few months, which is why sellers need to be realistic with their expectations when listing their property for sale.”
Emma Cox, MD of Real Estate at Shawbrook, commented: “Challenges remain in the property market as the tough economic climate continues to produce fluctuating house prices. Though monthly prices are slightly up, they are still down year-on-year and more than a third of sellers have had to slash asking prices, pointing towards reduced buyer confidence. Whilst the mix of inflationary pressures and high interest rates has no doubt caused hesitancy, there are still buying opportunities, particularly for professional landlords.”
Tomer Aboody, director of property lender MT Finance, said: “With non-stop interest rates rises over the past 14 months, this lull is inevitable. The government and Bank of England have forced the market into hibernation.
“Although August was subdued and activity down considerably compared with 2019, September has seen an uptick in transactions, with buyers concluding that the market will continue in this manner for a while so they need to bite the bullet and get on with moving. Thankfully mortgage rates are coming down, making buying more affordable.
“At some point the rate rises have to stop, allowing the market to breathe and take stock. This will, in turn, lead to a return of some confidence, which will translate into more transactions. Let’s hope this comes sooner rather than later.”