According to real estate agents, the lack of homes on the market continues to drive up home prices despite slowing buyer demand.
Inquiries from potential buyers fell 25 per cent in July compared to the same period last year, according to the Rics UK Residential Survey, which takes into account the views of licensed agents and surveyors.
However, buyer interest picked up slightly from June, when inquiries were down 27% year-on-year.
It is the third consecutive report in which demand has fallen, and the expectation is that it will continue to fall.
Buyer interest fell 25% in July and agreed sales for the month fell 13% compared to 2021.
The reduction in interest translated into a drop in sales volumes for the month, but Rics said it had not brought prices down yet.
Agreed sales fell 13 percent compared to the same period last year.
The slowdown in demand follows rising mortgage rates and general economic uncertainty.
Last week the Bank of England announced a 0.5% increase in its base rate to 1.75%, the biggest increase in 27 years, further raising rates on new fixed mortgages.
Since January 2022, interest on a typical two-year fixed mortgage has risen from 1.3% to 3.46%, according to an analysis by L&C Mortgages, increasing average monthly payments by around £159.
The increase caused a surge in demand for mortgage brokers, as prospective buyers tried to secure lower mortgage rates before lenders discounted the increase.
But despite rising costs, 63 percent of those surveyed by Rics reported an increase in home prices during July, virtually unchanged from 65 percent in June.
The only slight indication of a slowdown in price growth is the fall from the April peak of 78 percent which reports an increase.
Keep going up: House prices keep going up, according to 63% of Rics real estate agents
Tarrant Parsons, Senior Economist at Rics, said: “Amidst a backdrop of sharply rising costs of living, slowing economic growth and higher interest rates, it is not surprising that property market activity is losing some momentum.
‘As monetary policy will tighten further in the coming months, sales expectations point to a further decline in transaction volumes in the future. However, when it comes to house prices, the limited supply available is still seen as a crucial factor propping up the market.
“Although house price growth is likely to continue to slow, respondents still anticipate prices to be slightly higher than current levels a year from now.”
Cost of living ‘compromising’ chains from below
While many people are still itching to move, some real estate agents have raised concerns that the rising cost of living is beginning to affect the decisions of those at the bottom of the chains, such as first-time homebuyers. time.
Uncertainty among this group could have a ripple effect on other homebuyers.
Jeremy Leaf, a North London estate agent and former Rics residential chairman, added: “We are finding that the desire to move is outweighing concerns about continued increases in interest rates and the cost of living.”
“On the other hand, those concerns are disproportionately affecting low-income households, which is compromising the bottom of some chains, resulting in fewer and longer transactions.
“Demand is supported in particular by a lack of choice, low unemployment and rising rents, so prices are still growing at least for now, albeit more slowly.”
Andrew Wishart of Capital Economics says that while the supply of homes is tight, it’s not enough to sustain prices forever.
“With the balance of inquiries from new buyers still below the balance of sales instructions, the survey remains consistent with the fall in prices at the end of the year,” he adds.
Top position: Wales saw the highest number of sales per surveyor in the three months to the end of July, but Yorkshire and the Humber will take over for the long haul.
Wales tops the property sales chart…for now
On a quarterly basis, Wales saw the most sales per surveyor, but Yorkshire and the Humber in the long term are expected to overtake as the region with the most activity.
Anthony Filice, director of estate agents for Kelvin Francis in Wales, said: “There are more properties on the list, but they are taking longer to sell.” The ‘feeding frenzy’ among shoppers is receding.
‘Buyers are taking more time and some are making offers for more than one property before making a final decision. The situation coincides with the beginning of the summer holidays.’
In the rental market, demand for tenants continues to rise across the UK, with 36% of agents surveyed by Rics reporting an increase in inquiries.
However, 8 percent of those surveyed noted a decrease in instructions from new owners. Rics said rents were expected to continue to rise sharply across the UK.
The best mortgage rates and how to find them
Mortgage rates have risen substantially as the Bank of England base rate has risen rapidly.
If you’re thinking about buying your first home, moving or remortgaging, or are a buy-to-let landlord, it’s important to get good, independent mortgage advice from a broker who can help you find the best deal.
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