The Royal Institution of Chartered Surveyors (RICS) has revealed the results of their latest residential market survey. This survey has found that UK house prices increase last month at the slowest rate in over two years and it is likely to fall as a surge in mortgage costs adds to the uncertainty about the economy for homebuyers.
In September, the monthly house price growth rose by 0.8%, compared to 1.1% in August. This turned in an annual rise of 12.4%.
The results of the survey suggests were are going to see the end of the UK’s 13 year housing market boom. As a result, RICS has warned that many homeowners will begin to struggle to afford mortgage repayments leading to an increase in repossessions within the next year because of soaring interest rates.
Potential homebuyers are holding off from buying their first home as a result of the increasing rates. The number of inquiries from these possible homeowners dropped for a fifth month in a row in September and property sales fell to the lowest level since May 2020 when the coronavirus pandemic was at its peak.
Alongside this, the number of new instructions to sell has on average began to fall. This means that stock levels are at historic lows with an average of just 34 homes on estate agent’s books.
Simon Rubinsohn, chief economist at RICS, said: ““Storm clouds are visible in the deterioration of near-term expectations for both pricing and sales,”
“The turmoil in mortgage markets in recent weeks has compounded the increasing level of economic uncertainty resulting from higher energy bills and the wider cost of living crisis, shifting the dial in the housing market.”
Home prices themselves have continued to be resilient as a direct result of supply-demand imbalance however the rate of growth has been rapidly slowing over the last few months. There are many predictions that property prices will fall in the next year with increasing interest rates putting pressure on current household finances.
The Bank of England’s financial policy committee has claimed that the number of households who will find it difficult to afford mortgage repayments would rise to previous levels last seen in the 2008 financial crisis, especially if interest rates and living costs continue to rise.
“For now mortgage arrears and possessions remain at historic lows but they are inevitably going to move upwards over the next year, as pressure on homeowners grow,” said Rubinsohn. “It is difficult not to envisage further pressure on the housing sector as the economy adjusts to higher interest rates and the tight labour market begins to reverse.”
In agreement with the Bank of England’s thoughts towards Last week, Oxford Economics said that in major economies “Overall, this is the most worrying outlook for the housing market since 2007-2008, with markets poised between the prospect of modest declines and much steeper ones”.