UK house sellers are cutting their asking prices at the fastest rate in more than a decade, after high interest rates dampened demand for property this summer.
The proportion of homes on the market which have had at least one price reduction is at its highest level since January 2011, the property website Rightmove has reported.
According to Rightmove, more than 36% of properties on the market have had their asking price reduced at least once, compared with the pre-pandemic average of 31.2%, as sellers tried to attract offers.
The increase is due to a combination of interest rate rises, and lower activity in the housing market because of the summer holidays, Rightmove says, with the number of new properties coming up for sale in August being 6% lower than the 10-year average.
This led to average price reductions of 6.2%, which was also the highest since January 2011, knocking more than £22,000 off average asking prices.
These cuts suggest that some sellers were too optimistic with their initial asking prices and have had to make some bigger than usual adjustments, with the lenders Nationwide and Halifax both reporting that selling prices are falling at the fastest rate since 2009.
“Many a buyer and seller took a break over the summer to get some perspective on the property market,” said the property agent Emma Fildes, founder of Brick Weaver.
“For those sellers who’ve weathered the summer market, with no firm offers, they are proactively reducing their prices to enable a move. The next six weeks are an important window for sellers and buyers looking to move by Christmas or early next year. To avoid disappointment there must be realism from both sides,” Fildes added.
Rightmove reports that average asking prices are 0.4% lower than a year ago this month, at £366,281.
UK surveyors have blamed elevated mortgage costs and economic uncertainty for the slowdown in the housing market this year. Borrowers could face further pressure this week, if the Bank of England votes to raise interest rates for the 15th time in a row on Thursday.
Rightmove says there are signs that activity is starting to pick up after a subdued August, with the number of new properties coming to market up by 12% in the first week of September.
“Plenty of sales are being agreed for properties that are priced at the right level, and those that are selling are still taking five days less than at this time in 2019,” said Tim Bannister, director of property science at Rightmove.
“We’re also seeing the number of fall-throughs decline as market conditions and mortgage rates stabilise,” Bannister added.
Mortgage lenders have recently been cutting their fixed-rate deals, on hopes that UK interest rates may be close to their peak. Last week The Mortgage Works, a division of Nationwide, launched a five-year fixed-rate deal priced at 4.99%, a sign that a “mortgage rate war” was well under way.
Tom Bill, head of UK residential research at Knight Frank, fears that buyer confidence has been badly damaged by the volatility of the past 12 months.
“A strong jobs market, lender flexibility and the prevalence of fixed-rate deals in recent years will all curb price declines but stability is needed to improve sentiment, which is the all-important lubricant in the housing market,” Bill said.
Bill predicted that average house prices will fall by a “single-digit” amount this year, and again in 2024.
