House prices ‘grind to a halt’ as lettings market grows, says RICS

House price growth in the UK is“grinding to a halt” while the lettings market continues to rise at a solid pace, according to the Royal Institution of Chartered Surveyors. 

The national net balance for surveyors seeing a growth in house prices was -2% in October, the institution’s monthly residential market survey showed. 

As the figure is the number of people reporting a rise minus the number of people reporting a fall in prices, it means more saw a house price fall than rise. 

RICS said this was the first fall in positive house price growth readings for 28 months. It was +30% in September and +51% in August. 

While respondents to the survey noted a net balance of +46% in rising tenant demand for lettings in October. 

There was also a fall in new buyer enquiries, from a net balance of -36% in September to -55% in October, which was the sixth successive monthly fall. 

Simon Rubinsohn, RICS’ chief economist, said: “The latest feedback to the RICS survey provides further evidence of buyer caution in the face of the sharp rise in mortgage costs. As a result, the volume of activity is likely to slip back over the coming months and realistic pricing is now much more important to complete a sale.”

He added: “As far as the lettings market is concerned, the imbalance between demand and supply still appears unusually extended leading to rent expectations in the survey remaining at elevated levels and it is difficult to see this changing anytime soon in the current environment.”

Rubinsohn also said that what happens in the employment market “remains critical to the medium-term outlook”. Which he said seemed “solid” at the moment. 

The October survey also showed that the average time to complete a house sale in the UK is now closer to 18 weeks when at the same time last year it was about 16 weeks. 

Surveyors reported a negative outlook on how prices would grow over the next year, with a net balance for the twelve-month price expectations sinking to -42% in the latest findings, falling from a reading of -18% last month. 

In the lettings market, landlord instructions fell to a net balance of -14% of respondents at the headline level. This means rents are expected to be driven higher over the near-term, with this prediction returning a net balance reading of +52. 

The RICS findings follow mortgage lender Halifax earlier this week reporting October’s house prices fell 0.4% month-on-month - the biggest drop for 20 months.

Savills is now predicting UK house prices to drop 10% next year, Zoopla meanwhile last month released a prediction that 4% to 5% would be the ‘new norm’ for mortgage rates, while prices drop 5%.