House prices continued to fall, dropping 19% in August according to the RICS UK Residential Survey published today.
It says that a second consecutive monthly fall in buyer enquires, at -17% compared to -7% in July, as well as agreed sales down -24% compared to -17% the previous month, have impacted prices.
However, high expectations around yields – especially in the north where 10% is the new benchmark – and over-ambitious investment metrics are also having an impact on house prices, according to Stuart Collar-Brown, president of NAVA Propertymark and head of client acquisitions for Bidx1 (London).
Speaking ahead of the release of the survey which predicts a continued softening of prices of -20% over the next three months, Collar-Brown said: “Regardless of what the RICS results say, on the ground, we are seeing a market which is effectively stuck. We work closely with receivers and insolvency practitioners, and their priority is to recover the money they have lent, but the developers who borrowed that money can’t sell their stock.”
A stuck market
He said there is also a misalignment of current prices. “The valuations we’re doing show the original loan values are higher than what the property is worth today, and that is the problem. Banks aren’t incentivised to take stock back at a lower price, so the market is stuck.”
The situation is recoverable if banks take action, however, he says. “This isn’t like 2007–09; there is money out there, but until banks adjust their positions to realise the losses and then reset lending, house prices are unlikely to rise. Right now, what people are willing to pay simply doesn’t match the loan book values, and the gap is being widened by those higher interest rates.”
Russell Anderson, commercial director of mortgages at Paragon Bank, also believes that things need to change. “We need to ensure that investment in the private rented sector remains viable,” he says.
“That means creating an environment where landlords feel confident to grow and maintain their portfolios to the high standards that renters rightly expect. Lenders and brokers have a role to play by working with landlords and offering finance options that facilitate this, but broader support is needed.”
“Policymakers must consider the long-term impact of regulation and taxation on landlord confidence and behaviour. A balanced approach that protects tenant rights while encouraging responsible investment is essential if we’re to see a healthier, more sustainable rental market.”
