RICS survey shows demand falling
Activity in the residential sales market deteriorated in June, according to the latest UK Residential Survey by the Royal Institution of Chartered Surveyors (RICS), with negative net balance readings returned across many indicators.
New buyer enquiries fell to a net balance of -45%, compared to -20% recorded in May, the lowest such reading since October 2022. Similarly, newly agreed sales dropped from -8% in May to a net balance of -34% in June, making it the most downbeat figure since December 2022.
On the supply side, new sales instructions held steady in June, with respondents recording a net balance of -1%, compared to +14% in May. Despite this, the average number of homes available for purchase remains very low on a longer-term historical comparison, the report notes.
Simon Rubinsohn, RICS Chief Economist, commented, “The latest increase in interest rates and the impact this has already had on mortgage rates is clearly visible in the key RICS metrics regarding buyer enquiries [and] sales.”
Rising mortgage costs make defaults more likely
Banks and building societies expect the level of mortgage defaults to increase over the next quarter, according to a report from the Bank of England (BoE), but lenders are strong enough to withstand the rise in customer defaults.
Since successive rate rises have taken Bank Rate from 0.1% in December 2021 to 5% last month, households have been under increasing pressure to keep pace with their mortgage costs. An estimated 4.5 million homes have already seen repayments increase.
As fixed-rate mortgage deals expire and people renew their loans, many more will be affected. Indeed, monthly payments are expected to increase by at least £500 a month for nearly one million households by the end of 2026, the BoE has warned, potentially leading to a significant rise in customers defaulting on repayments.
Rental market surge in demand
Tenant demand is still soaring, newly released data shows, while the number of landlords advertising new properties has fallen sharply.
Private rental prices paid by tenants in the UK rose by 5.1% annually in June, according to figures released by the Office for National Statistics. This is slightly higher than the 5.0% recorded in the year to May 2023.
Rental prices increased by 5.1% annually in England, 5.8% in Wales and 5.5% in Scotland. In England, the West Midlands led the way (+5.4%), while the North East recorded the lowest rise (4.4%). London’s annual percentage change of 5.3% was the highest annual rate since September 2012.
Separately, respondents to the latest RICS survey returned a net balance for landlord instructions of -36%, the most negative reading for this metric since May 2020.
House prices headline statistics
| House Price Index – (May 2023)* | 149.9 |
| Average House Price | £285,861 |
| Monthly Change | 0.0% |
| Annual Change | 1.9% |
*(Jan 2015 = 100)
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- Average house prices in the UK increased by 1.9% in the year to April 2023
- On a non-seasonally adjusted basis, average UK house prices were stagnant between April 2023 and May 2023
- The average price in London was £525,629.
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House prices –Prices change by region
| Region | Monthly change (%) | Annual change (%) | Average price (£) |
| England | -0.4 | 1.7 | £303,557 |
| Northern Ireland (Quarter 1 – 2023) | -1.8 | 5 | £172,005 |
| Scotland | 3.0 | 3.2 | £192,518 |
| Wales | 0.6 | 1.8 | £213,374 |
| East Midlands | 0.3 | 3.4 | £247,242 |
| East of England | -0.8 | 0.0 | £345,710 |
| London | -1.2 | 0.8 | £525,629 |
| North East | -1.0 | 4.0 | £158,779 |
| North West | -0.2 | 2.7 | £211,790 |
| South East | -0.9 | 1.5 | £388,873 |
| South West | -0.2 | 1.0 | £323,765 |
| West Midlands Region | 0.5 | 2.2 | £248,166 |
| Yorkshire and The Humber | -0.4 | 1.2 | £204,588 |
Source: The Land Registry
Release date: 19/07/23
Next data release: 16/08/23
Average monthly price by property type
May 2023
| Property Type | Annual Increase | |
| Detached | £449,975 | 2.3% |
| Semi-detached | £274,943 | 1.4% |
| Terraced | £233,140 | 1.6% |
| Flat / maisonette | £231,404 | 2.3% |
Source: The Land Registry
Release date: 19/07/23
Housing market outlook
“How deep or persistent the downturn in house prices will be remains hard to predict. Consumer price inflation is likely to come down in the near term as energy and food prices look set to reverse their steep rises, but core inflation is clearly proving stickier than originally expected. With markets now forecasting a peak in Bank Rate of over 6%, the likelihood is that mortgage rates will remain higher for longer, and the squeeze on household finances will continue to put downward pressure on house prices over the coming year.”
Kim Kinnaird, Director at Halifax Mortgages
Source: Halifax July 2023
Contains HM Land Registry data © Crown copyright and database right 2023. This data is licensed under the Open Government Licence v3.0.
Written and supplied by The Outsourced Marketing Department. All details are correct at the time of writing (20 July 2023)
If a rise in interest rates takes 12 months to work into the system and have an effect on inflation, why not put up income tax, that would have an instant effect. An increase in income tax hits everyone (including Mr Bailey and his chums who I bet don’t have mortgages and have money in the bank, which benefits from higher interest rates!)