Connect with us

Hi, what are you looking for?

Editor’s Pick

Rising mortgage rates force housing market slowdown

House sales continued to slow last month while the rental market picked up pace as prospective buyers put off purchases amid the surge in mortgage rates.

Inquiries among new buyers fell for a sixth consecutive month in October and the average time taken to complete a sale rose as buyers became wary about a looming recession, according to the latest survey from the Royal Institution of Chartered Surveyors.

The net balance for new buyer enquiries fell sharply to -55 per cent in October, down from -36 per cent the month before, suggesting that prospective buyers are increasingly cautious about purchases as financial conditions deteriorate.

House price growth, which hit record levels during the pandemic, has ground to a halt as people’s budgets are squeezed. The net balance for house prices stagnated in October after 28 consecutive months of growth. The index score fell to -2 per cent, down from 30 per cent in September.

The average time taken to complete a sale from the date of the initial listing rose to 18 weeks, up from 16 weeks in October last year.

However, rental prices continued to rise, with a net balance of 42 per cent of survey respondents reporting an increase in the past month. The number of new landlords fell, with a net balance of -14 per cent over the same period.

Demand was outpacing supply in the rental market, pushing up forecasts for rental prices, Simon Rubinsohn, the institution’s chief economist, said, adding that it was “difficult to see this changing any time soon in the current environment”.

The price of rental properties is expected to rise as the stock of homes available to let fails to keep up with demand. Chartered surveyors polled by the trade body expect rents to have risen by an average of 4 per cent across the country in a year’s time.

House buyers are facing a jump in the cost of borrowing after the Bank of England last week increased interest rates for the eighth time in a year, taking the base rate to its highest level since the global financial crisis at 3 per cent.

Central bank officials have warned that further rate rises are on the way amid fears that inflation, initially caused by a surge in global energy prices, has become “embedded” in the economy via higher wage demands and businesses’ plans to continue increasing the prices of goods and services. However, interest rates are not expected to rise as far as the 5.25 per cent priced into the money markets ahead of the Bank’s decision last week, ratesetters have said.

Since just before the pandemic, house prices have risen by more than 25 per cent, according to estimates published on Monday by Halifax, the mortgage lender. Even with the recent fallback, prices remain near a record high.

Average prices fell by 0.4 per cent to a five-month low of £292,598 after dipping by 0.1 per cent in September, according to the index, the sharpest fall in prices since February last year. The annual rate of growth dropped to 8.3 per cent from 9.8 per cent the previous month.

Rubinsohn 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. The settling down in financial markets could provide some relief, although it may be premature to assume this will be reflected in a reduction in lending rates any time soon.”

Tom Bill, at the Knight Frank estate agency chain, said house prices had peaked. “We expect prices to fall back to the level they were at in summer 2021 as rates normalise after 13 years,” he said.

Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest

Editor’s Pick

The UK’s biggest broadband and mobile operators have today met with the government to follow up on commitments agreed in the summer to support...

News

The International Monetary Fund expects the Philippine economy to expand by 6.5% this year, matching the lower end of the government’s 6.5-7.5% goal. —...

News

FINANCE SECRETARY Benjamin E. Diokno speaks at the BusinessWorld Economic Forum at the Grand Hyatt Manila, Nov. 29. — PHILIPPINE STAR/ KRIZ JOHN ROSALES...

News

HOUSE SPEAKER Ferdinand Martin G. Romualdez delivers a keynote speech during the BusinessWorld Economic Forum Forecast 2023 at the Grand Hyatt Manila on Tuesday....

News

IT’s the time of the year when reunions are celebrated with friends and loved ones, and Alice Reyes Dance Philippines (ARDP) showcases just that...

News

AREIT, Inc. is planning to grow its assets at an average of 100,000 square meters (sq.m.) of gross leasable area annually from 2023 to...

You May Also Like

News

BW FILE PHOTO GROSS BORROWINGS by the National Government reached P2.6 trillion as of end-September as it continued to raise funds to respond to...

News

REUTERS By Luz Wendy T. Noble, Reporter The country’s foreign exchange buffers slightly increased as of end-October as the value of the central bank’s...

News

KARASOLAR.COM TENA, Ecuador — Ecuador’s rainforest Achuar people say their ancestors long dreamed of a “fire canoe” or “electric fish” that would let them...

News

COVID-19 has had a significant impact on the mental health of Filipinos across different groups all over the archipelago. From frontline workers, parents balancing...

Disclaimer: Respect Investment.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2022 Respect Investment. All Rights Reserved.