Rents soar as high interest rates shut out buyersGood morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Residential rents across Britain are rising at their fastest pace on record as high interest rates shut buyers out of the property market, prompting sellers to slash their asking prices.
New data from estate and letting agent Hamptons this morning show that the average rent on a newly-let property has jumped by 12% in the year to August, the fastest since its index began in 2014.
This pushed the average monthly rent on a newly-let home in August to £1,304, less than a year after it hit £1,200 for the first time.
Aneisha Beveridge, head of research at Hamptons, said:
“Each passing month has ushered in a new rental market record. Rents have risen more in the last 12 months than they did between 2015 and 2019.
“While the current pace of rental growth is unsustainable long term, many mortgaged landlords are being squeezed just as tightly as tenants.”
Landlords, who have been hit by the increase in UK interest rate over the last 20 months, have responded by pushing up rents paid by tenants, where they can.
Beveridge adds:
“Higher rents are only going some way towards helping mortgaged landlords balance their books, rather than boosting their profit. This is one of the reasons we haven’t seen large numbers of new landlords come into the market.”
The jump in borrowing costs has also made it harder for tenants to buy their own home instead of renting, with average fixed-rate mortgages over 6%.
The resulting slowdown is prompting many sellers to slash their asking prices. New data from Rightmove morning shows that the proportion of homes on the market reduced in price has hit the highest since January 2011 (more on that shortly).
But overall, asking prices for new homes rose 0.4% in the last month, though were 0.4% lower than a year ago.
The Rightmove index is just new listings.
They also report “36.3% of properties currently for sale have had a price reduction, with an average reduction equating to £22,700 nationally (6.2%)” t.co/wQjlGCRpUp
— Neal Hudson (@resi_analyst) September 18, 2023This comes at the start of a busy week for central bankers.
On Thursday, the Bank of England is expected to raise UK interest rates for the 15th time in a row, from 5.25% to 5.5%, as it continues to battle inflation.
But that could be the final hike in the current cycle, with the BoE’s Monetary Policy Committee hopeful that inflation will fall markedly by the end of this year.
Philip Shaw of Investec says:
The committee’s deliberations are set against a background where inflation has trended lower and the economy appears to be weakening, with surveys hinting the service sector may be following manufacturing into a downturn.
The agenda 10am BST: Germany’s Bundesbank to release monthly report
10am BST: Liz Truss speaks about her plans for economic growth at Institute for Government
3pm BST: NAHB/Wells Fargo US housing market index
Key events
Here’s Victoria Scholar, head of investment at interactive investor, on today’s reports on the UK housing market:
“Rightmove said UK asking prices rose by 0.4% in September after falling by 1.9% in August. However, the rise is below the ten-year average of 0.6%, home sales are down 7% versus 2019 pre-covid and asking price reductions reached a 12-year high. Nonetheless, the property website expects the market to pick up in autumn as mortgage rates ease. It said the number of homes on the market rose by 12% in the first week of September already.
The latest figures from Rightmove point to green shoots of recovery for the housing market with a slight pick-up in asking prices in September, a typically busy back-to-school time of year for housing market transactions after the end of the summer lull and before the festive season begins. While the Bank of England’s aggressive stream of rate hikes have hit borrowing affordability and house prices, mortgage sellers have started to offer more competitive rates to respond to dwindling demand as the central bank gets closer to the end of its tightening cycle. Despite this, it is likely that house prices will cool further this year as the culmination of high inflation, rising interest rates, the cost-of-living crisis and elevated borrowing costs take their toll.
Meanwhile a separate report from Hamptons showed that residential rents in the UK are rising at their fastest pace on record. Average monthly rental costs surpass £1,300 for the first time, jumping 12% year-on-year in August. Clearly the knock-on effect of surging mortgage costs has prompted many would-be buyers to turn towards the lettings market instead as they wait for mortgage rates to come back down again.”
Goldman Sachs has lowered its forecast for peak UK interest to 5.5%, meaning one more increase – this Thursday.
Goldman economists now believe that Bank of England will then leave interest rates on hold at the next meeting in November, rather than hiking again to 5.75%.
They say:
“Looking ahead to the November meeting, we see a greater chance that sequential wage and price pressures will have cooled sufficiently to allow the MPC to go on hold, given their preference for a flatter peak.”
Full story: More house sellers cutting asking prices as market coolsUK house sellers are cutting their asking prices at the fastest rate in more than a decade, after high interest rates dampened demand for property this summer.
The proportion of homes on the market which have had at least one price reduction is at its highest level since January 2011, the property website Rightmove has reported.
According to Rightmove, more than 36% of properties on the market have had their asking price reduced at least once, compared with the pre-pandemic average of 31.2%, as sellers tried to attract offers.
This led to average price reductions of 6.2%, which was also the highest since January 2011, knocking more than £22,000 off average asking prices.
These cuts suggest that some sellers were too optimistic with their initial asking prices and have had to make some bigger than usual adjustments, with the lenders Nationwide and Halifax both reporting that selling prices are falling at the fastest rate since 2009.
“Many a buyer and seller took a break over the summer to get some perspective on the property market,” said the property agent Emma Fildes, founder of Brick Weaver.
More here:
Rents soar as high interest rates shut out buyersGood morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Residential rents across Britain are rising at their fastest pace on record as high interest rates shut buyers out of the property market, prompting sellers to slash their asking prices.
New data from estate and letting agent Hamptons this morning show that the average rent on a newly-let property has jumped by 12% in the year to August, the fastest since its index began in 2014.
This pushed the average monthly rent on a newly-let home in August to £1,304, less than a year after it hit £1,200 for the first time.
Aneisha Beveridge, head of research at Hamptons, said:
“Each passing month has ushered in a new rental market record. Rents have risen more in the last 12 months than they did between 2015 and 2019.
“While the current pace of rental growth is unsustainable long term, many mortgaged landlords are being squeezed just as tightly as tenants.”
Landlords, who have been hit by the increase in UK interest rate over the last 20 months, have responded by pushing up rents paid by tenants, where they can.
Beveridge adds:
“Higher rents are only going some way towards helping mortgaged landlords balance their books, rather than boosting their profit. This is one of the reasons we haven’t seen large numbers of new landlords come into the market.”
The jump in borrowing costs has also made it harder for tenants to buy their own home instead of renting, with average fixed-rate mortgages over 6%.
The resulting slowdown is prompting many sellers to slash their asking prices. New data from Rightmove morning shows that the proportion of homes on the market reduced in price has hit the highest since January 2011 (more on that shortly).
But overall, asking prices for new homes rose 0.4% in the last month, though were 0.4% lower than a year ago.
The Rightmove index is just new listings.
They also report “36.3% of properties currently for sale have had a price reduction, with an average reduction equating to £22,700 nationally (6.2%)” t.co/wQjlGCRpUp
— Neal Hudson (@resi_analyst) September 18, 2023This comes at the start of a busy week for central bankers.
On Thursday, the Bank of England is expected to raise UK interest rates for the 15th time in a row, from 5.25% to 5.5%, as it continues to battle inflation.
But that could be the final hike in the current cycle, with the BoE’s Monetary Policy Committee hopeful that inflation will fall markedly by the end of this year.
Philip Shaw of Investec says:
The committee’s deliberations are set against a background where inflation has trended lower and the economy appears to be weakening, with surveys hinting the service sector may be following manufacturing into a downturn.
The agenda 10am BST: Germany’s Bundesbank to release monthly report
10am BST: Liz Truss speaks about her plans for economic growth at Institute for Government
3pm BST: NAHB/Wells Fargo US housing market index