In the UK, the rate at which house sellers are reducing their asking prices has hit its quickest pace in over a decade. According to Rightmove, the property listing site, the proportion of homes receiving at least one price reduction has soared to its highest since January 2011.
The numbers? A significant 36% of homes on the market have had their prices slashed at least once. This is a noticeable increase from the pre-pandemic average of 31.2%. Such reductions, which average at 6.2%, equate to over £22,000 off the typical asking price.
The cause? Factors like interest rate hikes and a quiet summer for the housing market have played a role. But there’s more to the story.
Behind the Shift: What’s Causing These Changes?
Several elements have intertwined to drive this trend:
- Interest Rate Influences: A higher interest rate often means increased mortgage costs. This can result in reduced property demand, especially when rates rise continuously. Currently, the Bank of England is mulling over a 15th consecutive interest rate hike.
- Summer Slump: The summer holidays often lead to decreased activity in the property market. In August, the number of new properties up for sale was 6% below the 10-year average.
- Initial Overpricing: Some suggest that sellers have been too bullish with their initial prices. Renowned lenders like Nationwide and Halifax have observed selling prices dropping at the swiftest pace since 2009.
Emma Fildes, founder of Brick Weaver, encapsulates the sentiment by stating, “For those sellers who’ve weathered the summer market, with no firm offers, they are proactively reducing their prices to enable a move.” As the year end approaches, this phase becomes crucial for both sellers and buyers eager to seal a deal before Christmas or early next year.
The Current State & Glimmers of Hope
Despite the prevailing trends, all is not bleak. Rightmove’s recent data shows that average asking prices are now 0.4% lower than last year, standing at £366,281. However, this isn’t entirely negative.
Tim Bannister, director of property science at Rightmove, paints a hopeful picture, “Plenty of sales are being agreed for properties that are priced at the right level, and those that are selling are still taking five days less than at this time in 2019.” In addition, there’s been a notable decline in transaction fall-throughs as market conditions become more stable.
Moreover, with the potential peak in UK interest rates, mortgage lenders are cutting their fixed-rate deals. This is evident with The Mortgage Works, part of Nationwide, introducing a five-year fixed-rate deal at 4.99%. These actions hint at a brewing “mortgage rate war”.
However, Tom Bill, head of UK residential research at Knight Frank, stresses the importance of buyer confidence. Bill mentions, “Stability is needed to improve sentiment, which is the all-important lubricant in the housing market.”
The Road Ahead: Looking into the Future
Predictions suggest that we might witness average house prices decline by a single-digit percentage in both this year and 2024. However, as with any market, the property landscape is subject to various unpredictable influences.