House prices continue to rise although housing market activity is declining sharply, according to the latest survey from The Royal Institution of Chartered Surveyors (RICS).
The net balance of surveyors reporting that house prices have risen over the last three months fell to +63 in July, from +65 in June, but exceeded the consensus, +60.
But new buyer enquiries remained weak with the balance edging up to -25 in July, from -27 in June, but well below its average level in the 2010s, of +1.
However, the impact of the fall in demand on house prices is being cushioned by the scarcity of homes for sale.
The news dragged shares in housebuilders lower with Bellway PLC (LSE:BWY) down 1.25% to 2,363p, Persimmon PLC (LSE:PSN) down 1.69% to 1,856.50p and Barratt Developments down 0.93% to 490.90p.
Samuel Tombs, chief UK economist, at Pantheon Macroeconomics said: “Housing market activity is declining rapidly, driven by the surge in mortgage rates and the collapse in consumers’ confidence.”
He pointed out the that “The weakness of the new buyer enquiries balance is supported by other surveys, such as the BSA’s Property Tracker survey, which showed in quarter two that the net balance of households thinking now is a good time to buy a home was the lowest since Q3 2008.”
“The slump in demand is hardly surprising in light of the surge in mortgage rates.”
“The low level of redundancies suggests that forced sales will not rise imminently.”
“We continue to think that house prices will drop by only 2% in the second half of this year, and then will start to recover in 2023, as our forecasts for fewer further increases in Bank Rate than markets expect implies mortgage rates have some scope to fall from their current levels” Tombs said.
Victoria Scholar, head of investment at interactive investor said: “This morning’s data from RICS is another tentative sign that the slowing UK economy and rising interest rates from the Bank of England are starting to put pressure on the housing market.”
“Estate agents are reporting a drop in interest from new buyers, which may be in part a seasonal lull with the possibility that buyers return to the market in September.”
“However current macroeconomic conditions with inflation close to double digits, squeezed household budgets, rising energy bills and consumer confidence at a record low, suggest demand for housing is likely to struggle.”