Storm clouds are visible over the housing market – RICS

The housing market has lost further momentum in September as new buyer enquiries fell for the fifth consecutive month and indicators on new instructions and agreed sales also remained negative, according to the Royal Institution of Chartered Surveyors (RICS).

In the latest RICS UK Residential Market Survey, a net balance of -36% of respondents cited a fall in enquiries during September, while new instructions also remain in decline, evidenced by a net balance reading of -13%.

Stock levels are still at historic lows at the UK-wide level, with estate agents holding just 34 residential properties on average on their books. With the net balance for market appraisals decreasing to -20%, the pipeline for supply has further deteriorated over the past month.

RICS also said that while the latest national net balance of +32% indicates a continued increase in prices over the three months to September, it represents a noteworthy easing in the pace of growth, down from +51% previously.

Twelve-month price expectations have now turned negative, according to RICS, with respondents citing further expected substantial rises in mortgage rates as a factor putting pressure on the market over the year ahead. A net balance of -18% of respondents now expect a dip in prices over the coming 12 months, down from a reading of +3% last time out.

Read more: What will happen to house prices next?

In the lettings market, tenant demand picked-up according to a net balance of +42% of contributors, while a net balance of -13% of respondents reported a further fall in landlord instructions. Near-term expectations point to further strong growth in rental prices over the coming three months.

“Even though the headline price balance remains in positive territory for now, storm clouds are visible in the deterioration of near-term expectations for both pricing and sales,” Simon Rubinsohn, chief economist at RICS, commented. “Looking further out, the picture portrayed by the RICS survey has clearly shifted in a negative direction.

“The turmoil in mortgage markets in recent weeks has compounded the increasing level of economic uncertainty resulting from higher energy bills and the wider cost-of-living crisis, shifting the dial in the housing market.”

Read more: What to tell your clients amid market turmoil.

Tomer Aboody, director of property lender MT Finance, said that it’s no surprise that negative sentiment is emerging, suggesting that the housing market is slowing down.

“Until government and Bank of England policies are aligned, we will continue to face the uncertain shift in rates which means that buyers, along with sellers, would rather wait until things stabilise before making a move,” he pointed out. “This will mean a static market, on the whole, rather than price falls, unless sellers are forced to sell, which could be the case in some instances. Lenders will have to be helpful, sensible, and imaginative going forward.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, added that new buyers are pausing for breath while considering the pace and size of future interest rate hikes, so activity has reduced.

“Like us, many are waiting to see whether worries about mortgage repayments rising more quickly than expected outweigh benefits from cuts in stamp duty and other taxes – particularly for first-time buyers,” Leaf explained. “Risks of a correction are greater, but the market has proved its resilience repeatedly in the recent past. We’re told more borrowers have higher loan-to-value mortgage debt than in the last financial crisis of 2008, but we’re not seeing signs of a major correction in our offices yet.”