Property News

Rents And House Prices to Rise Across The UK

Rents And House Prices to Rise Across The UK

Rents and house prices will continue to rise across the UK even as demand drops because there is a severe lack of housing stock, research from RICS reveals.

According to the RICS Residential Market Survey for July, there was a continued fall in house sales over the month.

And while tenant demand is rising, there are fewer homes to rent which will push rent prices up.

However, tenant demand appears to have lost some momentum when compared with readings of +62% and +50% recorded in the three months to January and April 2022 respectively.

On the rental home supply front, a net balance of -8% of respondents noted a decline in new landlord instructions, and consequently, rents are expected to continue to rise sharply over the near-term by a net balance of +57%, with all parts of the UK anticipated to see a further increase.

House sales will continue to decline

RICS also says that with house sales reduced currently, predictions for the next three months also slipped further into negative territory, and for 12 months ahead, the sales expectations are the most downbeat since March 2020 (-36%, down from -21%).

The organisation also says that new buyer enquiries have seen a third month of negative readings – the net balance is -25% – and this is the longest stretch of falling demand from buyers since the early stages of the pandemic.

Their research shows that this is evident across the UK.

The reasons for the drop in activity is down to higher interest rates and the cost-of-living crisis – though the figures were calculated before the recent Bank of England rate rise.

The continued lack of supply is illustrated by new instructions remaining stagnant with average stock levels on estate agents’ books – an average of just 36 per branch – remaining close to an all-time low.

Little change in the volume of market appraisals being undertaken

RICS says that its research also reveals that respondents have seen little change in the volume of market appraisals being undertaken in relation to those seen 12 months ago, suggesting a material pick-up in the supply of homes is unlikely to emerge in the immediate future.

This lack of supply remains a crucial factor in underpinning continued growth in house prices.

A headline net balance of +63% of respondents reported an increase in house prices during July, and while this is more moderate than a recent high of +78% in April, it is comfortably above the long run average of +13% for this indicator – and is indicative of a firmly upward trend.

RICS also points out that the 12-month price expectations have now eased in each of the last five months, from a net balance reading of +78% back in February to a figure of +30% in the latest results, but this still signals that prices will be higher in a year’s time than they are now.

Housing market activity is now losing some momentum

Tarrant Parsons, a senior economist at RICS, said: “Amid a backdrop of sharply rising living costs, slowing economic growth and higher interest rates, it is little surprise that housing market activity is now losing some momentum.

“With monetary policy set to be tightened further over the coming months, sales expectations point to a further softening in transaction volumes going forward.”

He added: “Nevertheless, with respect to house prices, limited supply available is still seen as a crucial factor underpinning the market.

“Although house price growth is likely to continue to ease, respondents still anticipate prices will be modestly higher than current levels in a year’s time.”

Landlords warned that renters will struggle to pay rent

Tenants will struggle to pay their rent and bills as growing numbers of them are already cutting their food budget because of the cost-of-living crisis.

The warning comes from Sarah Coles, a senior personal finance analyst at the financial services firm Hargreaves Lansdown.

Sarah points to data from the Office for National Statistics (ONS) on how people are reacting to the cost-of-living crisis.

Spend 31% of their income on rent

The ONS data shows that tenants are less likely to have wiggle room in their budget because they spend 31% of their income on rent, compared to mortgagees who spend 18%.

Renters are also being hit harder by rising prices, especially by hikes in rents, and they are twice as likely to say their housing costs are rising – 33% compared to 16% of those with a mortgage.

The ONS figures show that around half (46%) of renters have cut back on food and essentials – compared to 33% of those with a mortgage and 27% of those who own outright.

They are also four times as likely to be behind on their energy bills than those paying a mortgage (8% v 2%), and they’re more than four times as likely to be behind on their housing costs (4% v less than 1%).

Tenants are also more likely to be borrowing more – 29%, compared with 19% overall, and they have less to fall back on too – 50% of renters couldn’t afford an £850 expense out of the blue, compared with 29% overall.

Renters are being forced to cut back

Sarah told “It’s a really worrying sign that renters are being forced to cut back in order to try to manage their rising housing costs and bills.

“It’s only a matter of weeks before we expect another significant hike in energy bills which risks pushing them to breaking point.”

She added: “At the moment, 4% of renters are behind on their rent, which is worrying enough in itself and is significantly higher than the proportion of mortgage borrowers who have fallen behind.

“However, 54% say it’s either very difficult or somewhat difficult to pay the rent – compared with 35% of those paying a mortgage who say it’s very, or somewhat difficult to meet this cost.

“It means rising prices are likely to push even more renters over the edge.”

Things are only going to get worse

Sarah said: “Unfortunately, it appears that things are only going to get worse.

“The HL Savings and Resilience Barometer forecasts for the coming year make for worrying reading for both tenants and mortgagees.

“Those on the lowest incomes and renters will be hit much harder by the cost-of-living crisis than those on the highest wages and will see far more damage done to their overall financial resilience.

“With less to fall back on, they’re more likely to wipe out any lockdown savings and build up even more in debt and arrears.”

Rightmove – Prices Down, But More Likely Due To Holidays Than Rate Rise

The latest research from Rightmove has revealed that the price of property coming to the market has witnessed its first fall this year, falling 1.3% (or -£4,795) in the month to £365,173.

However, this is being put down to the traditional holiday season – when prices and activity typically fall – rather than the recent interest rate rises or the cost-of-living crisis.

Rightmove says prices usually drop in August, with this 1.3% drop on a par with the average August fall over the past decade.

The portal argues that summer holidays are taking priority for many – with people able to go abroad more easily for the first time in two years – while some new sellers are pricing more competitively to secure a buyer quickly. This is in order to beat the lengthy average time to completion (currently estimated to be around 150 days) and move home before Christmas.

Supply constraints are improving and demand continues to soften, Rightmove adds, but the website says there is still a massive imbalance, which is keeping price falls low.

The research found that buyer enquiries to agents are down 4% on the hot market of 2021 (when the stamp duty holiday was still in play), but still remain 20% higher than 2019.

Meanwhile, new listings have increased by 12% on the same period in 2021, but remain 6% down on 2019. Available stock is also down 39% on 2019.

Rightmove says the latest interest rate rise of 0.5%, increasing the base rate to 1.75%, is placing further pressure on buyer affordability, with average monthly mortgage payments for new first-time buyers putting down a 10% deposit surpassing £1,000 for the first time.

This month also marks 20 years of Rightmove’s House Price Index, with national average asking prices more than doubling since 2002 (up by 34%). Prices in that time have gone from £155,994 to £365,173, comfortably outstripping both salaries and general inflation.

“A drop in asking prices is to be expected this month, as the market returns towards normal seasonal patterns after a frenzied two years, and many would-be home movers become distracted by the summer holidays,” Tim Bannister, Rightmove’s Director of Property Science, said.

“Indeed, for those that can, this may be their first summer holiday abroad since before the pandemic. Sellers who want or need to move quickly at this time of year tend to price competitively in order to find a suitable buyer fast, with some hoping to complete their move in time to enjoy Christmas in a new home.”

He added: “To achieve that this year, they’d need to beat the current average time between accepting an offer and completing the sale of four and a half months. Nevertheless, we’re still expecting price changes for the rest of the year to continue to follow the usual seasonal pattern, which means we’ll end year at around 7% annual growth, even with the wider economic uncertainty.”


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