According to this morning's report from Rightmove, the rise represents an increase in value of +£3,398 with the price of an average home now standing at £371,158.
A new asking price record may seem surprising given the market uncertainty that followed the government’s mini-budget in late September, but it will take time for any impact to filter through to house prices. There is also little sign of downwards price pressure on existing properties for sale, with the number of reductions up 2% on last month to 23% of all properties reduced, which is still much lower than the pre-pandemic five-year average of 32%.
It is very likely that asking prices will drop in November and December as they normally do, and it will be important to distinguish these seasonal price changes from market changes caused by other factors. Though we understand that price forecasts are at the front of minds for many, there are more economic events to play out before we can make a prediction for 2023.
Tim Bannister Rightmove’s Director of Property Science, comments: “What’s going to happen to house prices is understandably on the minds of many home-movers right now, especially following the market uncertainty after the government’s mini-budget. There has been no immediate effect on prices, but the trend of a slight softening in the pace of growth continues.
"New sellers coming to market in the month have been pricing strongly, and the number of homes that were already on the market seeing a reduction in price is still well below the long-term average. It will take a bit of time for the market to settle in to a new, more ‘normal’ level of activity following over two years of market frenzy, especially with new developments happening almost daily at the moment.”
The rapid rise in average mortgage interest rates has understandably caused some would-be home-movers to pause their plans and wait to see how the next few weeks and months unfold. Overall demand is down by 15% in the last two weeks compared with the same two weeks last year, but it is still 20% higher than the more normal market of 2019. Looking at the different market sectors, it appears that first-time buyers have been the hardest hit, as higher rates may prove to be a step too far for those who were already stretching their finances. Demand in the first-time buyer sector is down by 21% in the last two weeks compared to the same two weeks last year, though it is still up 24% compared to the more normal market of 2019.
But despite this hiatus affecting some would-be buyers as they wait for a steadier outlook, those who have already agreed their purchase are not losing their resolve. Only 3.1% of sales agreed have fallen through in the two weeks since the mini-budget, which is in line with the 3.0% over the same two weeks during 2019. Agents are reporting that those who managed to secure a mortgage offer at a lower rate are rushing to complete their purchase before that lower rate offer expires.
Tim concludes: “The vast majority of buyers who had already agreed to their purchase are still going ahead. Some aspiring first-time buyers will have had their plans dashed by the sudden nature of the mortgage rate rises, and now face a difficult situation with rents also rising, and a shortage of available homes to rent.
"Buyer demand was already starting to soften and higher interest rates were anticipated, but they’ve been brought forward sharply due to market uncertainties. Agents report that many of those who managed to secure a mortgage offer at a lower rate before lenders quickly increased them are now rushing through their agreed deal to avoid their offer expiring and facing a higher rate when they come to reapply. It’s understandable that some new movers who have the option to wait may want a clearer view than they’re getting right now before they proceed with a major purchase such as a home.
"With uncertainty over where mortgage interest rates will go, those who can still afford to proceed may decide that waiting too long could come at an even higher cost than taking action to move now, especially if the level of demand continues to outstrip supply and supports prices.”
Richard Davies, MD of Chestertons, says: “Halfway into October, London’s property market is beginning to see the impact of the current economic uncertainty on buyer demand. Whilst, year on year, buyer demand has dropped by 16% in the first two weeks of October, comparing this to the pre-pandemic market of 2019, registrations are still up by 11%.
“We continue to see healthy activity in terms of new instructions. Compared to this time last year, London has seen a 35% uplift in the number of properties available for sale. This is giving buyers a greater level of choice which was not the case earlier in the year when the market had low levels of stock.”
