Demand for U.K. houses is falling at its fastest paces since the pandemic began in early 2020 as “buyer caution” from soaring mortgage rates further weakens the property market, according to new figures.
Data shows an index measuring the change in new buyer enquiries in October fell for a sixth consecutive month, dropping to -55% last month compared to a -36% decrease in September.
This marks the biggest drop since the global financial crisis in 2008, not taking into account the housing market shutdown in 2020 due to U.K. pandemic restrictions.
The index, compiled by the Royal Institution of Chartered Surveyors (RICS), the U.K’s trade body for chartered surveyors, records the proportion of surveyors seeing an increase in buyer demand and those registering a shrinkage.
While demand is waning all across England, house prices are also falling. RICS records its house price index fell to -2% in October, the first negative reading since June 2020, down from +30% in September.
This mirrors the recent house price index from mortgage lender Halifax, which found U.K. house prices fell at its fastest rate in 21 months.
Simon Rubinsohn, chief economist at RICS, said the figures show “further evidence of buyer caution in the face of the sharp rise in mortgage costs. 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.”
Daily mortgage rates recorded by Moneyfacts have been on the rise since the recent market turmoil caused by the government’s mini fiscal announcement. As of Monday, average two-year fixed mortgage rates were at 6.44% (up from 4.74% on Sept. 23, mini-budget day) and five-year fixed rates have increased to 6.27% from 4.75%.
“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 anytime soon,” he added.
A Redfin real estate yard sign is pictured in front of a house in 2017 in Seattle, Washington.
The same could be said across the pond.
House prices recorded by Zillow
are barely moving, while in some areas, real estate markets are registering steep declines in valuations.
On Wednesday, Zillow reported a 0.1% increase in the average U.S. home price and cities like Las Vegas and Austin saw drops in average prices – 2.3% and 2.2% respectively.
Unlike the U.K, where taking out shorter two to five-year mortgages are more common, the average 30-year fixed-rate mortgage in the U.S. is around 7.25%. That has shot up from averages of 4% just a year ago.