House prices fall across UK but market pessimism eases

House prices are falling across the United Kingdom, with estate agencies at their most gloomy since 2009 and more than two-thirds of the most expensive properties selling for below their asking price, according to a survey published on Thursday by the Royal Institution of Chartered Surveyors.

The survey results show overall activity in the housing market as a whole has fallen sharply and continues to weaken across the sales market, however there are several indicators demonstrating a more stable picture emerging through the course of 2023.

The surveyors said its house price balance, which measures the difference between the percentage of surveyors seeing rises and falls in house prices, fell to minus forty-eight in February from minus forty-six in January - the lowest figure since April 2009.

Most significantly, the new buyer enquiries rebounded to a net balance of -29% - measured on a seasonally adjusted basis, improving from -45% in January. While this metric is still signalling a decline in demand, and represents the tenth consecutive negative monthly reading for new buyer enquiries, it is also the least negative result since July 2022.

Survey carried out by the Royal Institution of Chartered Surveyors finds majority of most expensive properties selling for below asking price.

Conversely, the new sales indicator was also less negative in February, improving from a net balance of -36% to -26%. However, the average time taken to complete sales continues to rise and is now approaching 19 weeks.

Britain's housing market cooled in recent months following the Bank of England’s base rate increase for the 10th consecutive time, to four percent. However, BoE governor, Andrew Bailey, last week signalled they may have peaked.

Financial markets are still pricing in two more rises to about 4.5 percent, however, in contrast with last autumn’s forecasts that borrowing costs would peak between five percent and six percent this year.

In the mainstream housing market - covering prices up to £500,000, about sixty percent of surveyors said that prices were being agreed at below the asking price. For properties priced between £500,000 and £1m, the share jumped to just over seventy percent.

It can also be recalled that the Halifax house price index earlier this week showed an unexpected jump in prices last month, potentially reflecting improvements in mortgage rates and consumer confidence.

“The housing market continues to adjust to the tighter lending climate, with stretched mortgage affordability still weighing heavily on activity,” said senior economist, Tarrant Parsons. “Going forward, near-term expectations suggest market activity will remain generally subdued over the coming months, although the latest survey feedback shows tentative signs that the ongoing decline in buyer enquiries is now moderating”.

Sam Rees, senior public affairs officer at RICS, noted that the housing market had a “critical” role in the UK economy and emphasised the need “to boost supply through new builds and commercial property conversions”.

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