There is a hint of optimism as expectations for near-term sales activity improve
A new report from the Royal Institution of Chartered Surveyors (RICS) has shown a relatively subdued UK housing market, with key indicators on buyer demand, sales, and prices remaining slightly negative.
The new buyer enquiries measure posted a net balance of -7% in June, similar to the -8% recorded in May, indicating a modest weakening in demand for the third consecutive month.
Meanwhile, the newly agreed sales gauge showed a net balance of -7%, slightly better than the -13% from the previous month.
The June 2024 RICS UK Residential Market Survey has also revealed that despite recent declines, forward-looking sentiment has improved, with a net balance of +20% of respondents anticipating a recovery in residential sales volumes over the next three months, up from +10% in May.
New instructions to the sales market slowed in June, with a net balance of -9%, ending six consecutive months of positive readings. The new market appraisals indicator also declined to +1% from +17% in May, suggesting a flat level of appraisals compared to a year ago.
House prices at the aggregate level continued to trend slightly lower, with the headline net balance remaining at -17%. East Anglia, the South East, and the South West of England reported negative readings, while Northern Ireland and Scotland saw positive net balances of +64% and +29%, respectively.
However, near-term price expectations stabilised, with a three-month ahead price expectations net balance of +5%, indicating a perceived end to the decline in house prices. At a 12-month horizon, a net balance of +41% of contributors expect house prices to increase.
“Although activity across the housing market remained subdued last month, forward looking aspects did improve slightly,” said Tarrant Parsons (pictured left), senior economist at RICS. “There are some factors emerging now that could support a recovery in the months ahead.
“If the Bank of England does decide that the current inflation backdrop is benign enough to start loosening monetary policy next month, this may prompt a further softening in lending rates. In addition, the recent election delivered a clear outcome, with housing pushed up the political agenda.”
Jeremy Leaf (pictured right), a north London estate agent and former RICS residential chairman, however, said that the election had limited impact on buyers and sellers, not just because the outcome had been largely factored in, but the pace and level of mortgage rate reductions was much more relevant.
“Over the past month and particularly since the result, we have seen a rebound in confidence and activity,” Leaf stated. “However, we are not getting carried away as the increased choice and continuing economic concerns will keep the higher price aspirations of homeowners in check.”
In the rental market, a net balance of +28% of survey participants observed an increase in tenant demand in June, though new landlord instructions fell from a net balance of -3% to -11%, indicating a decline in rental listings.
Looking ahead, a net balance of +38% of respondents expect rental prices to rise over the next three months, consistent with trends observed since January.
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