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Mortgage Fears Chill UK Housing Market
14 May
Summary
- Buyer inquiries and sales volumes have declined significantly.
- Sellers are hesitant to list properties amid market uncertainty.
- Regional price falls are widening, impacting southern areas most.
The housing market in England and Wales is experiencing a subdued period, with estate agents reporting a "noticeable softening" in buyer demand. This caution is largely attributed to fears of rising mortgage rates and increased inflation, exacerbated by the conflict in the Middle East.
Clients are worried about potential interest rate hikes, as the Bank of England has indicated that higher inflation is unavoidable due to soaring oil and gas prices. Consequently, mortgage rates are expected to be influenced by rising government borrowing costs.
Activity and sentiment are predicted to remain downbeat, especially in southern England and London, where affordability issues are most severe. A net balance of 34% of RICS members reported a fall in new buyer inquiries in April, a slight improvement but still indicative of weak market momentum. Agreed sales also deteriorated, with a net balance of 36% reporting a decrease.
The flow of new properties coming onto the market has remained largely stagnant. Furthermore, 34% more members reported decreases in house prices over the past three months than increases, marking a significant deterioration. While some regions like the north of England still show marginally positive price readings, London and the south-east are experiencing stronger price falls.
In the rental sector, demand is outpacing supply as landlords exit due to increased regulation and taxes. A net balance of 14% of RICS members reported a rise in demand from new tenants, while a net balance of 25% expect rents to increase in the coming months.
