Earlier this year, the market factored in a cut in the Bank of England base rate as inflation fell precipitously, and this encouraged plenty of potential vendors to commit.
But actual mortgage rates have been rising ever since due to increasing market pessimism about inflation and this has gently put the brakes on the recovery. Understandable hesitancy on the part of buyers has resulted in a surge of oversupply which will negatively impact price growth going forward.
While uncertainty about a rate cut continues to hamstring the UK economy, the European Central Bank has, quite sensibly, firmly signalled an imminent cut and both Sweden and Switzerland have already cut.
Uncertainty is eroding Britain's business and consumer confidence and what we are seeing now is a minor dose of the jitters. Obviously, the danger for the UK property market is that rising supply will create a glut and therefore a standoff between buyers and sellers, while the procrastination experts of Threadneedle Street sit on their hands.
Rapidly rising stock levels are impacting price growth. This month's overall increase of just 0.4% indicates that vendors' confidence has been somewhat dented as transaction rates wane. However, vendors in the North East, Yorkshire and Scotland remain much more bullish than in the southern regions.
For the time being, price cutting of properties on the market is within the normal range. However, should the mortgage market not improve, vendors in the South will be the first to come under pressure to moderate their asking prices.
Unfortunately, the East of England, London, the East Midlands, the South West and the South East are already on the back foot, as indicated by their negative year-on-year growth.
Time on the market
As spring optimism fades, properties are lingering on the market for longer. The average time on the market for unsold property is up eight days compared to May 2023. Only London and Scotland indicate year-on-year reductions in average marketing times.
Of the remaining regions, the greatest slowdowns are visible in Wales and the East Midlands, with both having increased their average time on market by 21 and 17 days respectively compared to May 2023.
Rents
Asking rents continue to show positive growth in all regions except Greater London, the UK's largest rental market, where they continue to indicate weakness. However, the rate of decline has slowed to 3.2% as greater numbers of boroughs return to positive growth.
The North East continues to be the regional growth leader, followed by Yorkshire, registering hefty year-on-year hikes of 17.3% and 15.1% respectively. Unsurprisingly, supply in the North East is the tightest of all the regions.
UK asking rents are currently 3.4% above their May 2023 reading.
The annualised mix-adjusted average asking price growth (sales) across England and Wales is now 0.4%; in May 2023, the annualised rate of increase of home prices was a dismal -0.8%.
