Property sales and house prices continued to decline across the UK in January, surveyors reported on Thursday, and most signs point to continued falls.
The Royal Institution of Chartered Surveyors (RICS) house price balance, which measures the gap between the percentage of surveyors seeing rises and falls in house prices, fell to -47 from -42 in December, the lowest since April 2009.
This is the ninth monthly fall in new buyer inquiries in a row, the lowest monthly balance since the aftermath of the global financial crisis and the third-largest annual drop since the data was first collected in the 1970s.
RICS said all the indicators point to a further slowdown in the housing market in the coming months, as borrowing costs have risen sharply.
Simon Rubinsohn, chief economist at RICS, said the overall mood of the market as measured by surveyors remained subdued.
"However, it is questionable how much downside to pricing there is likely to be given that recent macro forecasts from the Bank of England and others are now envisaging a less harsh economic environment this year," Rubinsohn said.
The weakness in the housing market bodes badly for the wider British economy, warned economist Kallum Pickering at Berenberg.
"The UK’s consumer-oriented economy is sensitive to large gyrations in house prices – which impact the net wealth of households and often amplify swings in the business cycle.
"Although economic data held up decidedly better than expected in late 2022, slumping housing market activity signals that the near-term risks are tilted to the downside."
On the plus side for homeowners, Victoria Scholar, head of investment at Interactive Investor, the "chronic shortage of supply and an improving view on the outlook for the UK economy look set to prevent a more painful slide".
She added: "With the Bank of England approaching the peak for interest rates and mortgage lenders having to price competitively amid the drop in demand, there could be pick-up in borrowing later this year, particularly if inflationary pressures on the cost-of-living continue to ease."