Estate agents across the UK have seen a sharp reduction in interest and offers from potential buyers in recent weeks after interest rates soared following the government’s mini budget.
Potential buyers have faced growing uncertainty since late September, when the Bank of England raised interest rates in response to the budget. Lenders pulled mortgage products from the market and some raised their rates to over 6%.
Agents described seeing a drop of around 50 per cent in the number of home viewings and inquiries after mortgage costs increased, which “scared off” buyers.
Luke Gidney, managing director of Leeds-based estate agency HOP, said I that buyer demand had fallen significantly since the end of last month, describing the state of the market as “a real mess.”
“In April we were putting a property up for sale and we normally had to limit viewing to around 30 viewings as there were too many people wanting to see it.
“We were listing the property and within an hour the phone was just off the hook. Now it’s totally the opposite. We sometimes scratch our heads thinking ‘we just listed the property and the phone hasn’t rang yet, what’s going on?’ “, did he declare.
John Baybut, managing director of Berkeley Shaw estate agents based in Liverpool, said I they had seen a 50% reduction in the number of people viewing properties since the budget as the ‘shock’ of rising interest rates ‘scared off buyers’.
“In the past two weeks, hardly anyone has been offered,” he said. “People who were looking to enter the market to buy or move, they’re like, ‘Well, I’m not going to do it now’ and they definitely won’t be doing it until Christmas.”
However, Mr Baybut added that so far he had only seen one buyer pull out of his housing chain as most of those chained had already secured their mortgages at a lower rate.
James Forrester, managing director of Birmingham-based estate agency Barrows & Forrester, said overall buyer inquiries were down 10%.
“For our agency, we would normally see around 25 to 30 inquiries per property in the first two weeks of listing. We’ve probably now dropped to 10 or 15 in total,” he said.
However, the buyers who remained active in the market were ‘quality’ buyers, meaning those who ‘already have their finances in place and know exactly what they are looking for’.
Housing analysts have predicted that house prices in the UK could be set to fall significantly as inflation squeezes household finances and rising interest rates impact the amount that people can borrow.
Mr Gidney said at the start of this year houses were typically being sold for 10% above asking price, whereas now people were typically offering 10% below asking price.
Mr. Baybut and Mr. Forrester both believe that reduced demand from sellers would cause prices to stagnate. However, they denied that the housing market would collapse as it did during the 2008 financial crisis.
Following the Covid-19 pandemic, house prices have soared, with buyer demand far outstripping supply. However, Mr Baybut said he now expected the housing market to ‘normalise’.
Safer housing market
“I feel like we’re going to end up with a lot of stocks in the market that we’re all going to have to work harder to sell. It looks very dark, but it’s only very dark compared to the last two years with the ease with which it has been to sell the properties,” he said.
Mr Forrester agreed that house prices were starting to “stabilise”, but expected prices would still be slightly higher this time next year than they are today.
He said there weren’t enough homes being built to keep up with demand, a problem only made worse by the impact of inflation on building materials and labor .
“Until [the Government] solves the supply problem, house prices will only do one thing. They will stagnate a bit, but they will still increase slightly,” he said.
At the other end of the scale, Marc von Grundherr, director of Benham and Reeves, a London-based estate agency, said rising interest rates “didn’t seem to have deterred anyone” in the market in which they operate due to a “chronic lack of stock”.
He said he has seen increased interest from overseas buyers looking to buy assets in London due to the decline in the value of the pound.
