The political arena remains uncertain as the UK introduces Rishi Sunak, its third Prime Minister of the year, to No. 10. The nation’s property market remains just as uncertain. The debate has moved on from whether house prices are falling or not. The debate now surrounds how big will the drop be?

October marks the first time house prices have fallen in fifteen months with a drop of 0.9%. The drop has seen the average property price to fall from £272,259 to £268,282. A fall of almost £4000. The reality could actually be worse due to the lag in data collection. It can take several months for transactions being agreed to them being reported as completed sales by Land Registry.

One of the country’s biggest lenders is Nationwide and their chief financial officer, Chris Rhodes, spoke with the Treasury Select Committee warning that prices could drop by 30% next year. A drop of this scale would see the average value of a home decrease by £80,000. This scenario is considered unlikely but representative of a worst-case scenario, worse even than the 2008 financial crisis that saw property prices fall by 21%. The best-case scenario would see prices continue to slowly increase but there more realistic outlook is that prices will fall between 8%-10% in 2023.

Today the Bank of England has risen rates to 3%, a height not seen since 2008. The rise of 0.75% is the banks 8^th consecutive rate rise and is the largest rise since 1992. The rise will mean cost increases for millions of mortgage borrowers, who are already facing a cost-of-living crisis driven by an 80% surge in energy bills. Mortgage holders on a variable or tracker rate will feel the impact of these rises instantly and roughly 1.8 million people who’s fixed-rate deals are due to expire next year can expect to see their payments go up. Homeowner with £200,000 mortgage they can expect to see their monthly bill rise by an average of £84.

The thinnest of silver linings is that today’s rate rise is not expected to push up the current fixed mortgage costs. Usually, this kind of rise would see a rise in the fixed rate mortgage rate but analysts have predicted them to remain stable. Lenders had already raised their rates in response to the former Prime Minister, Liz Truss’s mini-budget. This “Truss Premium” saw mortgage deals become overpriced as lenders played safe and priced further rises into their deals.

First-time buyers can expect to be hit hardest by the current state of the market. Not only are low-deposit mortgages disappearing from the market, but current mortgage deals are quickly becoming unaffordable. A first-time buyer looking to buy an average home of £247,000 and putting up a 10% deposit will face a monthly mortgage payments of £1,500 at the current rates of 6.5%. When the mortgage rates were 2% a first-time buyer could expect to pay £941 a month on a 25-year mortgage for the same property. To keep their monthly payments as low as that with the current rates they would need to quadruple their deposit. That would mean finding an extra £81,510.

This turmoil in the market is reflected in the dip in demand for property nationwide. Buyer demand has fallen by 40% in the South East and 30% in the West Midlands. Even more affordable areas such as the North East has seen demand dip by 20%. The only way for sellers to respond in the current market is to lower their price. Reductions are on the increase across the market and speed has become key to selling.

Property auctions are arguably the markets best answer to selling fast. There are two methods of auction. The Modern Method can see a property reach completion in 56 days of finding its buyer and the Traditional Method cuts that down further, to 28 days. The auction process also has a 95+% completion rate. The high success rate comes from the transparency of the process and from buyers paying the auction fees as soon as the property sells. Buyers are contracted to the completion of the sale once the fees are paid which is why the process sees little fall throughs.

The risk for sellers in the current market is getting months into a property sale only for property prices to drop further and their buyers either lowering their offer (Gazandering) or pulling out of the deal completely.­­