The average price tag on a home coming to market fell by £905 or 0.2% month-on-month in July, according to a property website.
Rightmove, which released the figures, said rising mortgage rates are biting, with house sales now lagging behind the more “normal” market seen before the coronavirus pandemic, in 2019.
While buyer demand remains resilient, the choice of available properties for sale is 12% lower than it was at the same point in 2019, Rightmove said.
Across Britain, the average asking price for a home is £371,907, with average asking prices still 2.6% higher than in January, it added.
First-time buyers, trader-uppers and downsizers with higher deposits and lower mortgage requirements appear to be still keenly searching the market— Tim Bannister, Rightmove
Tim Bannister Rightmove’s director of property science, said: “While prices and sales bounced back this year much more strongly than most expected, the unexpectedly stubborn inflation figures and the surprise of further mortgage rate rises when many felt that they had stabilised have contributed to the fall in prices and number of sales agreed.
“However, buyer demand remains resilient at 3% above 2019’s more normal market levels, buoyed by a shortage of quality property for sale and ongoing housing needs. First-time buyers, trader-uppers and downsizers with higher deposits and lower mortgage requirements appear to be still keenly searching the market, not wanting to miss out on the right property that is not over-priced and that they can still afford.”
Rightmove said smaller homes with a maximum of two bedrooms have been less impacted by the more subdued market.
This reflects the determination of the first-time buyer sector, as well as being an indication of some people deciding to retire early and downsize to a smaller property, it added.
Estate agents are reporting that even with market challenges, homes priced correctly in line with local market conditions are still attracting strong interest from motivated buyers keen to move, according to Rightmove.
Mr Bannister added that while some movers are pausing until there is more certainty over mortgage rates and they have reviewed how higher costs affect their plans: “There remains a large volume of motivated buyers who can factor rate rises into their budgets and are continuing to inquire about homes for sale, which is keeping the market functioning, albeit now with lower sales levels than at this time in 2019.
“Sellers who price right the first time, rather than starting with too high an asking price only to reduce later, have a much better chance of attracting one of these motivated buyers, and a good local agent will provide sellers with accurate evidence of prices that are being achieved in their area.”
High mortgage rates, which have priced out would-be first-time buyers, are stoking rental demand— Aneisha Beveridge, Hamptons
The findings were released as a separate index, from property firm Hamptons, found the average rent on a newly-let property in Britain rose to a record high of £1,273 per month in June.
The average rent costs around £110 per month or 9.4% more than a year earlier, according to Hamptons.
The Hamptons monthly lettings index has been running since 2012 and it is based on thousands of homes let and managed by Countrywide Group each year. It is based on rental prices achieved, rather than advertised rents.
The average rent on a one-bedroom home in Britain is £1,017 per month on average, according to the report. The average one-bedroom home now costs around the same to rent as the amount that an average two-bedroom property cost in April 2022, Hamptons said.
Meanwhile, the average two-bedroom property rental price (£1,170 per month) has reached the same level as the cost of a three-bedroom home in January 2022, it added.
Aneisha Beveridge, head of research at Hamptons, said: “High mortgage rates, which have priced out would-be first-time buyers, are stoking rental demand.”
She added: “With interest rates set to stay higher for longer and few new landlords buying, these pressures seem likely to continue in the medium term.”
