Significant Plunge in August Asking Prices for UK Residences

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UK (Parliament Politic Magazine) – In a clear indication of the property market’s slowdown, asking prices for homes in the UK have experienced their most significant August decline since 2018. This decline follows four consecutive months of falling house prices.

According to data from the property portal Rightmove, new sellers listed their homes for an average of £364,895 in the five weeks leading up to August 12. This figure is £7,012 lower than the previous month, marking the largest August drop since the onset of the Covid-19 pandemic.

Decrease In Asking Prices Occurs 

This 1.9% decrease in asking prices occurs at a time of notable wage growth and the easing of mortgage rates. These factors suggest potential improvements in affordability for UK homebuyers who have been grappling with high borrowing costs due to successive interest rate hikes by the Bank of England.

Many analysts anticipate that house prices will continue to decline throughout the year. According to Halifax, the average house price declined by 0.3% in July compared to June, marking the fourth consecutive monthly decrease.

However, despite Rightmove’s report of declining asking prices, the average house prices are still nearly 20% higher than levels seen four years ago before the pandemic, as noted by the group.

Tim Bannister, Director at Rightmove, stated, “There are still significant challenges in saving up enough for a deposit and affording higher mortgage payments.”

Full Year Profits To Fall Significantly 

UK housebuilder Crest Nicholson also issued a warning that its full-year profits would fall significantly below estimates due to the impact of high inflation and rising interest rates. The company stated, “While pricing has remained resilient in a market with limited supply and few distressed sellers, the economic uncertainty is deterring prospective home movers.”

Crest Nicholson projected an adjusted profit before tax of £50 million for the year ending October 31, down from analysts’ estimates of £73 million. The company, however, expects “inflation to abate and mortgage rates start to reduce.”

The average five-year fixed mortgage rate has already decreased to 5.81%, down from 6.08% at the end of July, as per Rightmove’s data. Nonetheless, mortgage experts caution that rates are unlikely to fall below 5% again this year.

Nicholas Mendes, Mortgage Manager at John Charcol, noted that the reduction in mortgage costs has only provided partial relief to households whose budgets have been stretched in the past year. 

He emphasized that affordability will remain a challenge for potential homebuyers, suggesting that higher income multiples would be necessary given the average wage and property price, unless a substantial deposit can be raised. Mendes also highlighted a growing trend where buyers are opting for more affordable but less desirable areas.

Agreed Property Sales 15% Lower Than Before 

During the mentioned period, the count of agreed property sales was 15% lower compared to 2019, according to Rightmove. This decline is attributed to the impact of high borrowing costs on sales.

Nevertheless, the data revealed that agreed sales for properties that typically attract first-time buyers exhibited greater resilience, experiencing a smaller decrease of only 10% during the same period.

Rightmove’s data also highlighted that asking prices for homes that are commonly sought after by first-time buyers decreased by 1% annually. In contrast, the average advertised rents for similar homes surged by 12%.

Tim Bannister, Director at Rightmove, commented, “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.”

Attributed to escalating mortgage expenses, the substantial decline in home asking prices in Britain this month has been evidenced as sellers adjust their anticipations, according to a recent industry survey published on Monday.

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Asking Prices For Gomes See A Big Drop 

Website Rightmove indicated that average asking prices for homes experienced a significant drop of 1.9%, marking the most pronounced August monthly fall since 2018 and twice as substantial as the typical seasonal decline during the summer period.

Despite the flourishing state of Britain’s housing market throughout the Covid-19 pandemic, its vigor has waned as a consequence of a series of interest rate hikes by the Bank of England.

In spite of the recent decrease in two-year mortgage rates from the 15-year peak witnessed in July, mortgage providers Nationwide and Halifax recorded declines in property selling prices in the previous month.

Beth Malcolm

Beth Malcolm is Scottish based Journalist at Heriot-Watt University studying French and British Sign Language. She is originally from the north west of England but is living in Edinburgh to complete her studies.