Mortgage experts warn soaring house prices putting buyers off
Mortgage professionals have reacted to the RICS market survey showing that UK house prices continued to rise in June despite “softening sales”.
The 18-page residential survey said house prices were continuing to increase across the whole of the country due to low housing stock, while adding that growth looked to be easing “to a certain degree”.
It noted that the volume of sales agreed over the month dropped slightly across the UK, with a net balance of -13% in June. In addition, demand for homes dropped significantly, with new buyer enquiries down -27% from -9% previously.
Read more: Property demand and sales are cooling, but are prices going down?
However, because of the limited stock of homes for sale, house prices continued to edge upwards. Most respondents (+65%) noted an increase in house prices over the latest survey period, although this was down by 14% compared to the April findings.
Half of the contributors reported that average sales prices were coming in above asking prices for properties listed at up to £500,000, although the percentage dropped to 39% for properties marketed at between £500,000 and £1 million. For properties listed at £1 million or above, sales prices came in slightly below asking prices.
Housing experts contacted by Mortgage Introducer warned that would-be buyers were being dissuaded by high property prices and the cost-of-living crisis, adding that there was an urgent need to address the housing supply issue.
David Hannah, group chairman of Cornerstone Tax, said UK house prices were continuing to rise “at a staggering rate”, but that buyers were being put off, citing the decrease for the third consecutive month in buyer enquiries.
He claimed that the 65% of surveyors who reported a rise in house prices was due “to the continued unbalanced supply and demand levels we are seeing in the UK property market”.
He said: “There continues to be a dire need for an increased supply of new builds, providing the UK housing market with some much-needed extra stock, which should, in time, subsequently decrease the astronomical average UK house prices we’re currently seeing.”
Emma Cox, MD of real estate at Shawbrook, noted that demand for housing had remained “remarkably resilient” but that “a cooling of sorts” was likely to occur “in the near future”.
She said: “With further rate increases predicted over the coming months, property ownership is becoming a tougher aspiration for many prospective buyers.
“The UK is desperate for an influx of quality, affordable housing to help meet demand and restore a sense of balance to the market. Mortgage providers still have a strong appetite to lend to buyers, and it’s important for borrowers to carefully review the options on offer and consider locking in a deal that will shield them from future uncertainty.
“Stability in the long-term can only be achieved with a balanced market of quality, affordable, energy efficient properties. Government support is crucial to reaching that goal.”
Paul Broadhead, head of mortgage and housing policy at the Building Societies Association (BSA), said it was “not surprising” that the number of people looking to buy or move home had started to slow down considering the food, fuel and energy increases the country was experiencing.
But he warned that the small downturn in house hunters was “not enough to address the imbalance between housing supply and demand”.
He said: “If house price growth is to be stemmed, we desperately need more homes. The government has a lofty ambition to build 300,000 new homes a year, and while we’ve seen some positive announcements recently, such as the launch of the Help to Build Scheme last month, far more action is needed if this target is to be achieved and housing supply and demand becomes more balanced.”
Richard Rowntree, managing director, mortgages, at Paragon Bank said the survey also highlighted how demand for privately rented homes “continues to exceed supply” in reference to the reported increase in tenant demand over the month.
Read more: Lenders see demand for mortgages plummeting in Q3 – BoE
Rowntree said: “Alongside an increase in landlord overheads, resulting from rising costs for energy, property maintenance and other essential items, this is placing upward pressure on rents with a net balance of +52% of survey respondents noting rises.
“Housing costs represent the biggest monthly outgoing for a substantial proportion of the population so any increase can have a significant impact on household finances at a time when many are already feeling the strain of the cost-of-living crisis.”
He said it was vital to have a healthy private rented sector given the shortfall of social housing and homeownership becoming increasingly out of reach for many would-be first-time buyers.
