Asking prices for UK homes have recorded their sharpest August drop since 2018 in another sign that the property market is slowing after four consecutive months of house price falls.
New sellers listed their homes for £364,895 on average in the five weeks to August 12, £7,012 less than in the previous month, representing the biggest fall at this time of the year since the Covid-19 pandemic, according to data from property portal Rightmove.
The 1.9 per cent drop in asking prices comes at a time of record wage growth and easing mortgage rates, which suggest tentative signs of improved affordability for UK homebuyers hit by high borrowing costs after successive interest rate rises by the Bank of England.
Many analysts expect house prices to continue to fall throughout the year. According to Halifax, the lender, the average house price fell 0.3 per cent in July.
But despite the drop in asking prices reported by Rightmove, average house prices remain nearly 20 per cent higher than pre-pandemic levels four years ago, the group said.
“There are still significant challenges in saving up enough for a deposit and affording higher mortgage payments,” said Tim Bannister, director at Rightmove.
UK housebuilder Crest Nicholson also warned its full-year profits would significantly undershoot estimates because of the impact of high inflation and increases in interest rates.
“While pricing has remained resilient in a market with limited supply and few distressed sellers, the economic uncertainty is deterring prospective home movers,” the company said on Monday.
Crest Nicholson said it forecast annual adjusted profit before tax of £50mn, down from analysts’ forecasts of £73mn, but expected “inflation to abate and mortgage rates start to reduce”.
The average five-year fixed mortgage rate has already fallen to 5.81 per cent, down from 6.08 per cent at the end of July, according to Rightmove. However, mortgage experts warn that rates are unlikely to fall back below 5 per cent this year.
Nicholas Mendes, mortgage manager at John Charcol, said the easing in mortgage costs had “only softened the blow” for households whose budgets had been stretched in the past year and said affordability would remain a hurdle for prospective homebuyers.
“Realistically, income multiples need to be much higher when you consider the average wage and property price, unless you can raise a substantial deposit,” he said, adding that buyers were increasingly opting for less desired, cheaper areas.
The number of agreed sales in the period was 15 per cent lower than in 2019 in the period, Rightmove said, as high borrowing costs hit sales.
However, agreed sales for properties that typically attract first-time buyers were more resilient, the data showed, with sales down only 10 per cent in the same period.
Asking prices for homes that attract first-time buyers fell 1 per cent annually, while average advertised rents for similar homes jumped by 12 per cent, Rightmove said.
“The prospect of owning your own home remains an appealing option for those that can afford it, with the alternative being an extremely frenzied rental market, where rents are at record levels,” said Bannister.
This article was written by Akila Quinio and Maxine Kelly from The Financial Times and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.