UK home sellers increased their asking prices at the slowest pace for any October since 2008, as economists trimmed their growth forecasts for the wider economy, reports published Monday show.
(Bloomberg) — UK home sellers increased their asking prices at the slowest pace for any October since 2008, as economists trimmed their growth forecasts for the wider economy, reports published Monday show.
The average price of a property put up for sale increased by just 0.5% from September to £368,231 ($449,190), according to property portal Rightmove. That’s well below the historic norm in October of 1.4%.
The sign of continued pessimism in the housing market comes as forecaster EY Item Club downgrades its prediction for growth in the UK economy next year, from 0.8% to 0.7%.
Read more: UK Rents Surge at Record Pace as Home Sellers Lift Asking Prices
A rapid string of interest-rate hikes from the Bank of England has held back potential home-buyers, who are now facing much higher mortgage costs than two years ago, and is depressing activity in the economy more broadly.
“The cost of debt is set to be the biggest headwind for the UK economy over the next 12 months, with consequences for both businesses and consumers,” said Hywel Ball, chair of EY UK. He said the growth downgrade for next year was due to the “lagged effects of the recent interest-rate rising cycle,” which has taken the BOE benchmark rate from 0.1% to 5.25% in less than two years.
But EY Item Club upgraded its predictions for economic growth this year from 0.4% to 0.6%, and said the UK should still manage to dodge a recession. Business investment growth prospects for 2023 had been “significantly upgraded” despite the higher cost of debt, it said, and inflation is expected to fall slightly faster than previously — hitting 4.5% at the end of this year and reaching the 2% target during the second half of 2024.
“Inflation is heading in the right direction, average wages are rising in real terms once more, and household and corporate balance sheets remain unusually healthy,” said Ball.
In the housing market, while activity is down 17% on last year by number of sales agreed, the number of buyers placing inquiries on each available home is still 8% higher than the same time pre-pandemic in 2019.
Read more: UK Housing Market Shows Signs of Improving After BOE Holds Rates
Tim Bannister, Rightmove’s director of property science, said the subdued rise in October’s asking prices “indicates that some new sellers are gradually heeding their agents’ advice to price competitively.”
“In a market that agents describe as the most price-sensitive ever, buyers are likely to be on the look-out for homes that they feel represent excellent value, and to attract one of these motivated buyers, sellers need to price right first time,” he said.
With the BOE hinting that its base rate may now have peaked, and with inflation heading down and signs that the labor market is loosening, mortgage rates are continuing to fall.
The average two-year fixed rate is below 6% for the first time since June, according to Rightmove, while the average five-year fixed rate has dropped from 6.08% 11 weeks ago to 5.43%.
Of the 11 regions in Great Britain, average asking prices were up month-on-month in the North West, Yorkshire & Humber, the East Midlands, London and the South East. The gain was greatest in London, where asking prices climbed 2.1% on September, driven by a 3.1% rise in the wealthy borough of Kensington and Chelsea.
Read more: UK House Prices Post Sixth Straight Monthly Fall, Halifax Says
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.