House prices ground to a halt in October after more than two years of growth, according to surveyors.
Rising mortgage costs are fuelling caution among buyers, the Royal Institution of Chartered Surveyors (Rics) said.
But rents are expected to continue heading upwards, amid an imbalance between demand from tenants and the supply of homes to let.
Across the UK as a whole, a net balance of 2% of property professionals reported house prices falling rather than rising.
This brought to an end a sequence of positive readings running for 28 months.
Some parts of the UK are still recording growth in house prices, however.
Property professionals based in Scotland and Northern Ireland continue to report a reasonably firm upward trend in house prices even if the pace of growth is softer than earlier in the year, Rics said.
By contrast, those in areas such as East Anglia and the South East of England were seeing prices heading downwards.
Professionals across all parts of the UK are now, on balance, of the opinion that house prices will fall over the year ahead.
New buyer inquiries fell for the sixth month in a row in October – and survey feedback on buyer demand was negative across the UK, Rics said.
It now takes 18 weeks on average to sell a property, up from 16 weeks typically a year ago.
In the lettings market, tenant demand continues to rise at a solid pace, with a net balance of 46% of survey participants noting an increase in October.
At the same time, landlord instructions fell. Given this mismatch, rents are expected to be driven higher over the near term. Rents are expected to be around 4% higher in a year’s time.
Simon Rubinsohn, Rics’ chief economist, said: “The latest feedback to the Rics survey provides further evidence of buyer caution in the face of the sharp rise in mortgage costs.
“As a result, the volume of activity is likely to slip back over the coming months and realistic pricing is now much more important to complete a sale.
“The settling down in financial markets could provide some relief although it may be premature to assume this will be reflected in a reduction in lending rates any time soon.
“However, the employment picture remains critical to the medium-term outlook and for the time being, that remains solid.
“As far as the lettings market is concerned, the imbalance between demand and supply still appears unusually extended, leading to rent expectations in the survey remaining at elevated levels and it is difficult to see this changing any time soon in the current environment.”
One estate agent based in Yorkshire and the Humber was quoted in Rics’ latest report as saying: “The market slowed dramatically in October following the mini-budget bombshell but there were signs it was slowing before this.”
Another, based in Scotland, said: “Certain sectors of the market are still performing well, particularly well-presented properties in good condition. Demand will, however, be impacted by increasing mortgage rates. Unpredictable times ahead.”
Tom Bill, head of UK residential research at estate agent Knight Frank, said: “October was undoubtedly a bad month for the UK property market but it hasn’t necessarily set the tempo for what comes next.
“As the impact of the mini-budget fades, mortgage rates will calm down before stabilising.
“The downwards pressure on prices will reduce to some degree as the economic and political backdrop becomes less disorientating.
“However, after growth of 25% during the pandemic, we believe it’s a reasonable assumption that house prices have now peaked.
“We don’t expect the sort of cliff-edge moment seen during the financial crisis but we expect prices to fall back to the level they were at in summer 2021 as rates normalise after 13 years.”
The findings were released as property website Rightmove said it was launching an Ofqual-regulated qualification for estate and letting agents.
Rightmove said the launch of the certificate for estate and letting agents (CELA) followed requests from agents to give their teams a way that their ongoing learning can be recognised through an official qualification.