Property sales stall while rental market picks up steam

The UK housing market is grinding to a halt, according to surveyors, with house prices falling in East Anglia and south-east England

For sale sign outside brick terraced houses
(Image credit: Getty images)

UK house prices ground to a halt in October after more than two years of growth, according to the latest survey by the Royal Institution of Chartered Surveyors (Rics (opens in new tab)).

Rising mortgage costs are fuelling caution among buyers, but rents are expected to continue heading upwards, due to an imbalance between demand from tenants and supply of rental homes.

In some areas, including the South-East and East Anglia, there are reports of property prices falling. However, other parts of the UK are still recording house price growth, such as Scotland and Northern Ireland.

Property professionals across the UK now think house prices will fall over the year ahead.

New buyer inquiries fell for the sixth month in a row in October, Rics said. It now takes 18 weeks on average to sell a property, up from 16 weeks a year ago.

Simon Rubinsohn, Rics’ chief economist, says: “The latest feedback to the Rics survey provides 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.

“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 any time soon.”

In the lettings market, tenant demand continues to rise, while the number of landlords offering properties is falling.

Given this mismatch, rents are expected to rise, and possibly be 4% higher in a year’s time, according to respondents to the Rics survey.

What next for house prices?

House price indices are painting a bleak picture of the market. The Halifax index, released a few days ago, revealed that average UK house prices fell in October, the third decrease in the past four months. The 0.4% drop was the sharpest it had seen since February 2021, taking the typical property price to a five-month low of £292,598. 

Tom Bill, head of UK residential research at estate agent Knight Frank (opens in new tab), says: “October was undoubtedly a bad month for the UK property market but it hasn’t necessarily set the tempo for what comes next.

“As the impact of the mini-Budget fades, mortgage rates will calm down before stabilising. The downward pressure on prices will reduce to some degree as the economic and political backdrop becomes less disorientating.”

However, he adds: “After growth of 25% during the pandemic, we believe it’s a reasonable assumption that house prices have now peaked.

“We don’t expect the sort of cliff-edge moment seen during the financial crisis but we expect prices to fall back to the level they were at in summer 2021 as rates normalise after 13 years.”

The consultancy Capital Economics (opens in new tab) is expecting a much bigger drop in house prices. 

Senior property economist Andrew Wishart comments: “The October Rics survey showed that the spike in quoted mortgage rates to over 6%, a level last seen in 2008, has triggered a collapse in buyer demand comparable to that seen in the financial crisis. That’s consistent with our view that transactions will slump to their lowest level for a decade in 2023 and that the average house price will fall by 12%.”

Additional reporting by PA

Ruth Emery is contributing editor at The Money Edit. Ruth is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times. A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service. Outside of work, she is a mum to two young children, a magistrate and an NHS volunteer.