(Bloomberg) -- UK home-sellers cut their asking prices at the quickest pace in four years after soaring interest rates made buyers more hesitant, Rightmove Plc said.
The property search website said the average asking price dropped by 2.1% in December to £359,137 ($440,980), an acceleration from the 1.1% decline in October. While sellers usually offer discounts in December to help complete sales before Christmas, Rightmove said the reduction was larger than usual for this time of year.
The figures add to evidence of a downturn in the property market, with the two biggest mortgage lenders reporting prices fell in each of the past three months. Rightmove said the drop in values next year is set to be limited to 2% as constraints on affordability of new homes are balanced by an increase in people looking to buy.
“Some buyers are distracted, not only by the festive season, but also by the thought that they may get a better fixed-rate mortgage deal and a more stable outlook by waiting until the new year,” said Tim Bannister, Rightmove’s director of property science. “Our data suggests that there are many ready-to-go movers out there waiting for what they feel to be the right time to enter the market in 2023.”
Rightmove said the number of views on its website rose 11% from a year ago, a sign that interest remains strong among potential buyers.
House prices in the south west of England fell the most in December, registering a drop of 3.4%. The decline was not as pronounced in London, but the capital has seen the second worst rate of annual growth in the country, up only 4.6% from 2021.
December’s findings put price growth at 5.6% for 2022, a slowdown on the 6.3% growth seen the year before. That underscores the toll that rising mortgage costs and economic uncertainty have taken on the market over the course of the year.
The Bank of England raised rates eight times in the past year, with its key rate hitting 3% in November, up from close to zero in 2021. Interest rates on mortgages shot up to above 6% in the wake of the former government’s disastrous fiscal statement on Sept. 23, and have not dropped far below those heights, even though financial conditions have since stabilized.
This has already fed into lower demand among buyers, with the rising costs of living augmenting affordability concerns for households.
“We expect that lower numbers of new buyers since the mini-budget will translate to lower transaction numbers,” said Guy Gittins, chief executive officer of the property agent Foxtons. “We have not seen huge numbers of properties come to the market, so we expect restricted supply to continue.”
Rightmove said the likelihood of forced sales remains low, which should help prevent a readjustment like that seen in the early 1990s, when homes lost a fifth of their value over three years, leaving many mortgage holders in negative equity.
©2022 Bloomberg L.P.