Despite UK average house prices reaching a record high of £294,260 ($337,839) in August, the Royal Institution of Chartered Surveyors on Thursday said sales fell for the fifth month in a row, implying the trend is becoming further entrenched.
Property inquiries were also down, falling at the fastest rate since the early stages of the coronavirus pandemic as the cost of living crisis and wider economic challenges affected market conditions.
It said a net balance of 39 per cent of property professionals reported a fall rather than a rise in new buyer inquiries in August, marking the sharpest downturn since April 2020.
New buyer inquiries have now been falling for four months in a row, a contrast with the rental sector where inquiries continue to rise.
Looking to the 12 months ahead, sales expectations are the most downbeat they have been since Rics started collecting the data in 2012, with a balance of 45 per cent of property professionals expecting falls.
However, with average stock levels on estate agents' books at a record low of 34 homes per branch, according to Rics' data, the pressure on house prices is still moving upwards.
"Looking ahead, contributors continue to note that the current level of market appraisals being undertaken is similar to that seen 12 months ago, suggesting the tight supply backdrop is unlikely to change dramatically in the near future," the report said.
A net balance of 53 per cent of property professionals reported an increase in house prices during August, down from 62 per cent in July but comfortably above the long-run average of 13 per cent.
Looking to the year ahead, however, expectations for house price growth have eased back with a balance of 3 per cent of professionals predicting prices will be higher in 12 months' time. This is down from a net balance reading of 78 per cent back in February.
Rising rent demand
In the lettings market, tenant demand continues to rise, with a net balance of 50 per cent of contributors seeing an increase in tenant demand over the month.
Alongside this, the latest net balance for landlord instructions came in at minus 13 per cent, indicating falling supply across the rental market.
Given this excess of demand over supply, rents are expected to rise in the near-term. When viewed over the next 12 months, rents are anticipated to rise by close to 4 per cent across the UK, Rics said.
"Concerns over the economic backdrop and rising interest rates continue to take their toll on market momentum, with strong activity early in the year now giving way to a more subdued picture," Tarrant Parsons, a senior economist at Rics, said.
"Moreover, given projections for the UK economy point to a potential recession emerging towards the end of 2022, respondents envisage housing sales continuing to slip in the coming months.
"For the time being at least, the lack of stock available on the market is still providing support to house prices, which continue to rise, even if the pace of growth has cooled over recent months."