More than 70% of house sales above £500,000 failed to achieve asking price, Rics says

Report 'highlights the impact of stretched mortgage affordability' on the housing market

Estate agents' 'for sale' signs in Islington, north London. PA

UK houses priced above £500,000 were more likely to be sold at a discount than cheaper properties in February, research by the Royal Institution of Chartered Surveyors has found, with stretched mortgage affordability weighing on housing market activity.

In its February survey of property professionals, Rics looked at the difference between asking and selling prices over the past three months.

In the mainstream housing market covering prices up to £500,000 ($592,000), 60.3 per cent of professionals indicated that prices were being agreed at below the asking price.

For properties priced between £500,000 and £1 million, the share of professionals reporting prices agreed at below the asking price jumped to 71.5 per cent — and the proportion on properties priced at more than £1 million was broadly similar, at 68.3 per cent, Rics said.

“It is worth noting that the majority of the feedback points to sales being agreed within 5 per cent of the ask price rather than anything significantly greater”, Rics added.

There were some signs of the housing market becoming less downbeat.

The proportion of professionals seeing new buyer inquiries in February improved compared with January, but overall the proportion seeing inquiries fall still outweighed those seeing increases.

While February marked the 10th negative monthly reading for new buyer inquiries, it was the least negative result since July.

The number of new sales being agreed was also less negative in February than in January, but the average time taken to complete sales continues to rise and is now approaching 19 weeks, Rics said.

An estate agent's window display in London. EPA

By contrast, in the rental market, demand from tenants continues to increase, while landlord instructions to let properties continue to decline, putting upward pressure on rental prices.

“As far as the lettings market is concerned, it is clear that respondents don’t envisage a material change in the demand supply imbalance in the foreseeable future, with rents seen as likely to rise by more than 25 per cent at the five-year time horizon”, the report said.

“The housing market continues to adjust to the tighter lending climate, with stretched mortgage affordability still weighing heavily on activity”, said Tarrant Parsons, senior economist at Rics.

“Given the ongoing weakness in demand, house prices remain on a downward trajectory, and are expected to see further falls through the first half of the year at least.

“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 inquiries is now moderating.”

“Ahead of the UK [Spring] Budget on March 15, Rics is emphasising the critical role housing has to the UK economy, and the need to boost supply through new builds and commercial property conversions where appropriate whilst conforming to the strictest standards”, said Sam Rees, senior public affairs officer at Rics.

The research is a monthly sentiment survey by Rics of chartered surveyors who operate in the UK’s residential sales and lettings markets.

The report also contained the views of some property professionals.

One, based in Yorkshire, commented: “Some return of activity in January after a very dull autumn. Prices falling faster than is widely acknowledged”.

Another, based in Birmingham, said: “After a very poor January when sales and instructions were well below a typical January, the market in February has steadily improved and although still patchy it seems to be moving towards levels last seen in 2018”.

A property professional based in Cardiff said: “Numbers of viewings are fewer, but those looking are serious. A healthy number of sales are being agreed, many at full asking prices, or near”.

A St Andrews-based professional said: “The number of instructions to sell is starting to rise, but at a slower rate than last year. There is a lack of supply but we expect this to change towards the end of March”.

Another, based in Belfast, said: “We have found new builds are popular and investors are looking as they seem to get a good return.”

Commenting on Rics’ findings, Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The report highlighted the impact of stretched mortgage affordability, and to make matters worse, there have been subtle changes in the mortgage market which could make life even more difficult.

“After months of rates slowly falling from the peak, we have seen some of the most competitive deals pulled from the market.

“Rate expectations are shifting slightly, as there are growing concerns that higher inflation might last for longer than expected.

“This is moving the swaps market (which underpins mortgage pricing) very slightly, making it more expensive for mortgage lenders to price a fixed rate — so that some of the best deals are off the table.

“This hasn’t moved the dial on average rates yet, but is one to watch.”