UK housing market demand in October fell on the quickest tempo for the reason that begin of the Covid-19 pandemic and registered one of many largest drops in additional than 20 years as mortgage charges surged, in accordance with a carefully watched survey.
The Royal Institution of Chartered Surveyors’ new purchaser inquiries index on Thursday fell for a sixth successive month within the gross sales market from minus 36 per cent in September to minus 55 per cent in October.
That is the bottom studying for the reason that 2008 monetary disaster, excluding spring 2020 when the housing market was largely shut due to pandemic-related measures.
It additionally marked the fifth-largest drop within the index — which tracks the share of surveyors reporting a rise in demand minus the share reporting a contraction — since information started in 1999, with purchaser demand adverse throughout all components of the nation.
Simon Rubinsohn, Rics chief economist, mentioned the info offered “further evidence of buyer caution in the face of the sharp rise in mortgage costs”.
Mortgage charges shot up following the “mini” Budget on September 23, when former prime minister Liz Truss introduced £43bn of unfunded tax cuts. The transfer resulted in hovering coverage price expectations for 2023.
Although markets have since calmed, they’re nonetheless pricing in an increase in rates of interest by the Bank of England to 4.6 per cent by subsequent summer time.
The base price is at current 3 per cent, up from simply 0.1 per cent in December final yr.
Separate BoE knowledge final month discovered the common new mortgage price rose to 2.84 per cent in September, the best since 2015. However, day by day figures from the monetary web site Moneyfacts present charges at the moment are even greater, albeit decrease than on the peak of latest market turmoil.
Rubinsohn mentioned monetary markets calming “could provide some relief, although it may be premature to assume this will be reflected in a reduction in lending rates anytime soon”.
With demand falling, the Rics home costs index dropped to minus 2 per cent in October, down from plus 30 per cent in September and the primary adverse studying since June 2020.
It was additionally a lot worse than the slowdown to twenty per cent forecast by economists polled by Reuters.
Tom Bill, head of UK residential analysis at property agent Knight Frank, mentioned October “was undoubtedly a bad month for the UK property market”.
“After growth of 25 per cent during the pandemic, we believe it’s a reasonable assumption that house prices have now peaked,” he added.
Data from mortgage suppliers Nationwide and Halifax final month confirmed home costs had already dipped month on month in October. Estate agent Savills has forecast that UK home costs will contract by 10 per cent subsequent yr.
That forecast is in keeping with the Rics index for home value expectations for the yr forward, which fell from minus 18 in September to minus 42 in October, the bottom since April 2020.
Prices are falling even because the inventory of housing per surveyor has dropped to the bottom on file, in accordance with Rics.
With extra individuals unable to purchase a property, the lettings market remained wholesome; the web steadiness for tenant demand was a strong 46 per cent studying in October, the survey confirmed.
At the identical time, landlord directions fell to a internet steadiness of minus 14 per cent, main surveyors to count on a strong rise in rents over the close to time period.