Home sellers in London cut £23,400 off their asking prices in August, as interest rate rises finally take their toll on house prices, new research shows.
Asking prices in London fell by 3.5pc to £668,587 compared to July, according to property website Rightmove.
Sellers in the most expensive parts of the country are having to face up to the fact that buyers are grappling with an affordability crunch following huge jumps in mortgage rates.
Nationally, Britain’s wealthiest home sellers cut £17,500 off their asking prices in August – a hit of 2.6pc, as the property market power balance finally starts to shift to buyers.
On average, across all price brackets and areas, asking prices on homes fell by 1.3pc. This was the first drop recorded this year.
The average home costs nearly £5,000 less than it did a month ago, as typical asking prices fell to £365,173, down from £369,968 in July.
The figures show the imbalance between supply and demand is beginning to shift, as the largest jumps in mortgage rates on record start to hit home buyers.
The number of new listings jumped 12pc compared to this time last year, while buyer inquiries fell by 4pc.
But it will take a long time for supply to outstrip demand. These figures were still down 6pc and up 20pc respectively compared to 2019.
Homes have been selling so fast for so long that it will take a long time for the rise in listings to boost overall supply – which is still down 39pc compared to before the pandemic.
Tim Bannister, of Rightmove, said: “The size of this imbalance will prevent major price falls this year.”
Year-on-year, asking prices in August were up 8.2pc (down from 9.3pc in July). Rightmove expects the annual growth rate to fall to 7pc by the end of the year.
The Bank of England’s largest interest rate rise for 27 years earlier this month is hitting buyer affordability. Average monthly mortgage payments for a first-time buyer with a 10pc deposit have exceeded £1,000 for the first time, a rise of a third since the start of 2022.
The hit from interest rate rises will filter into the market over the rest of the year, but the impact on the market will not be immediate, Mr Bannister said. This is because prices are still underpinned by a shortage of supply, and there is a strong desire to move.
Josephine Ashby, of John Bray estate agents in Cornwall, said: “We are just starting to see things ease a little in line with the uncertain political and economic climates.”
Demand is still high, but house price growth will slow as more supply comes to the market, Ms Ashby added.
Prices also typically dip in August as buyers go on holiday and the sellers who want to move before Christmas start to price more competitively, Rightmove said.