Rising mortgage costs are making buyers cautious, the Royal Institution of Chartered Surveyors (RICS) said. But rents are expected to continue rising, as property demand outstrips supply.
Across the UK, professionals reported house prices falling, ending 28 months of positive readings. But some areas are still recording growth.
Scotland and Northern Ireland still report a firm upward trend in prices even if the pace is slower than earlier in the year, RICS said.
By contrast, East Anglia and the South East of England were seeing prices dropping.
Professionals across the UK now believe house prices will fall over the year ahead.
In the lettings market, shortages mean rents are expected to be around four percent higher next year.
The latest market snapshot from the Royal Institution of Chartered Surveyors shows another robust performance for lettings.
RICS says tenant demand continues to rise at a solid pace, with a net balance of 46% of survey participants noting an increase in October.
At the same time, landlord instructions fell once again according to a net balance of 14% of respondents at the headline level.
Given this mismatch, surveyors say rents are expected to be driven higher over the near-term.
At the 12-month time horizon, respondents envisage rents picking up by around four per cent nationally.
RICS chief economist Simon Rubinsohn 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 anytime soon.
“However, the employment picture remains critical to the medium-term outlook and for the time being, that remains solid.
“As far as the lettings market is concerned, the imbalance between demand and supply still appears unusually extended leading to rent expectations in the survey remaining at elevated levels and it is difficult to see this changing anytime soon in the current environment.”
Stark Warning Over Massive Rent Rises To Come – Letting Platform Predicts
An online rental platform warns the average rent bill could reach as much as £2,270/month if prices rise in line with the hikes already seen across other living costs.
Numerous factors, foreign and domestic, continue to have a direct impact on living costs.
The price of rent, however, has not yet matched the increasing costs seen across other areas of life. In the past year, the average cost of a month’s rent in the UK has increased by £98, rising from £1,061 in 2021 to £1,159 in 2022. This is an annual increase of 9.2 .
While this is certainly a notable rise, Ocasa rental platform warns it’s far less than the rate of increase of other living costs.
In the past year, the average price of energy has increased by 95.8 %. If rent had experienced the same annual increase, it would now cost £2,269/month.
In London – the UK’s most expensive rental market at £1,752/month is 2021 – a 95.8 per cent hike would bring the price up to £3,808/month.
In the South East, such an increase would mean that prices increased from £1,139 to £2,422, and even in the UK’s most affordable rental market, the North East, rent would now cost £1,192.
The past months have also seen a sharp rise in inflation rates – up 9.9%.
The same rise in rent would leave the national average at £1,274/month while prices in London (£2,138), the South East (£1,359), and the North East (£669) would also leave renters significantly worse off.
Ocasa sales director Jack Oadby says: “It can only be a matter of time before this area of life also strains household finances as landlords raise rents in order to compensate for their own cost increases in both their personal and professional lives.
“Many households who are already bracing for a very harsh winter are likely to be under even more strain before Spring 2023 and we expect that the cost of renting may well be yet another household outgoing driving this financial strain.”
Rental Demand “Massively Outstripping Supply” In London
Cluttons says renter demand in central London is massively outstripping the supply of homes available for let, while the sales market is more subdued.
Rental growth in London is outstripping growth outside the capital, according to data showing asking and achieved rents.
Annual rental growth in London slowed slightly but remained in double-digits at 11% compared to a UK excluding London figure of 9%.
Rightmove’s index, based on asking rents, recorded even higher annual growth of 16.1% according to their Q3 index report, again ahead of the rest of the country which was on 11%.
James Hyman, head of agency at Cluttons, says: “Lettings demand across central London remains very strong, with corporate tenants returning to the market and adding to this.
“Buy to let landlords have reported the additional costs and regulations of operating in that market are restricting new entrants, putting even more pressure on supply. The sharers market – typically four bed houses at £800 to £1,000 per week – is seeing particularly strong demand.”