The UK housing market is in crisis at the moment. Property asking prices are declining, while competition between sellers has hit a 10-year-high. Colleen Babcock, a property specialist at Rightmove, says recent shifts, such as hikes in stamp duty, have made a difference. These changes have led first-time sellers to hold off on their pricing plans.
As Rightmove reports, the number of homes on the market has continued to explode, up 11% from last year and still climbing. This surge of new properties has increased competition for sellers, creating an even tougher environment to lure buyers. From the South to the Midwest, in June, homebuying demand retreated as asking prices plummeted. The south-west was down 1.6%, the south-east 1% and London 0.9%.
According to Aneisha Beveridge at Hamptons, buyer demand up 3 per cent year-on-year. At the same time, she sees some early warning signs that the rental market is weakening. Collapsing lettings market In May, lettings branches experienced a 17% decrease in tenant registrations. This represents a 33% decline from the same month last year. This rapid drop in demand is an indication that we are witnessing an important change in the market dynamics, with too many buyers having second thoughts.
Babcock draws attention to an amazing increase in inventory of homes for sale. He continues, “We’re living through the greatest number of homes for sale in 10 years, and the impact of all recent stamp duty hikes across England is starting to be felt on price by new sellers. The high inventory levels coupled with lower buyer demand have made it essential for sellers to adjust their expectations regarding property prices.
The rental market’s weakening is compounded by shifts in the mortgage landscape. Many landlords rolling off short-term fixed-rate mortgages are enjoying double-digit declines in their monthly payments. Beveridge explains, “Landlords rolling off short-term fixed-rate mortgages are now seeing their monthly payments fall, reducing the need to pass on further costs to tenants.” While this is positive news for lowering some financial burden for renters, it reflects the overall trend of housing corridor change.
In addition to that, Beveridge provides interesting context on the ways that the rising mortgage rates are impacting would-be homebuyers. She adds that declining mortgage rates are changing the math for renters. Now, would-be homebuyers are doing the math and rethinking their plans. Due to unsustainable rental growth over the last three years, purchasing has become cheaper than renting for a majority of homebuyers. As a result, there are more first-time buyers in the market than usual.
With the market recalibrating to these new realities, sellers will be forced to compete in a fertile yet cutthroat buyers’ market. The drop in asking prices is a clear indicator of the difficulty for everyone trying to sell their home this summer. As buyer demand increases and rental market activity is beginning to cool, the dynamics are changing.