But uncertainty over future rate cuts and the upcoming budget is dampening optimism
Recent declines in mortgage interest rates have driven a positive shift in the UK housing market, according to the Royal Institution of Chartered Surveyors (RICS).
Its Residential Market Survey for August 2024 indicated an increase in buyer demand and sales activity, with industry professionals expecting further growth in the final quarter of the year.
According to the survey, the number of prospective homebuyers has risen, with a net balance of +15 respondents reporting improved demand, up from +4 in July.
House prices have also entered positive territory for the first time since October 2022, with a net balance of +1, and +14 respondents expecting prices to continue rising over the next three months.
On the supply side, new property listings have seen a modest uptick, with a net balance of +7, an increase from +3 in July. Appraisal activity suggests this trend may continue, potentially providing more options for buyers.
In the rental market, tenant demand remains steady but is growing at a slower pace. The net balance of +11 in August is down from +26 in July, though it still reflects ongoing renter interest. However, the supply of rental properties continues to decline, with new landlord instructions dropping to a net balance of -21, down from -9 the previous month.
This shortage of rental properties is expected to continue driving up rents, with a net balance of +39 survey respondents forecasting rent increases in the near term.
“The latest RICS survey captures an improvement in sentiment over the past month in the wake of the modest decline in mortgage rates, with buyer interest improving, albeit from a relatively low base, and stock levels edging up,” said Simon Rubinson (pictured), RICS chief economist.
Tomer Aboody (pictured right), director of specialist lender MT Finance, echoed these sentiments, stating that market sentiment “has noticeably improved as mortgage rates have started coming down, following the reduction in the base rate.”
“We are seeing a higher level of transactions as more properties come onto the market and buyers are more willing to act,” he said.
Rubinson, however, pointed out that uncertainty around future interest rate cuts and the forthcoming budget is tempering the optimism.
“Affordability remains an issue in the sales market, even with somewhat cheaper finance now available, but the picture appears even more acute in the lettings market where the amount of rental stock continues to diminish,” he added. “Contributors continue to point to landlords looking to scale back their portfolios which will inevitably increase the imbalance that already exists in the market.”
Aboody also cautioned that if the upcoming budget includes unfavourable measures, it could dampen market activity. He also pointed out the ongoing challenges in the buy-to-let sector, where a shortage of rental properties is pushing rents higher.
“Rental properties are the bread and butter of the UK economy, and the government would do well to remember that,” he said.
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