The housing market in the UK has experienced a shift. After a brief period of increasing interest from buyers, the enthusiasm seems to be waning again due to the escalating mortgage rates. This change in market dynamics is evident from the latest findings of the RICS UK Residential Survey, which provides a detailed look at the current state of the housing market.
April’s survey results marked a turning point, showing a decline in new buyer enquiries from a net balance of +6 to -1. This shift ended a three-month streak of positive figures, highlighting a stagnation in market activity, particularly in London and the Southern parts of England where the loss of momentum was most pronounced. The survey captures the cooling interest among potential buyers, influenced largely by the current financial climate and mortgage affordability.
Property Listings on the Rise
On a brighter note, there’s been an increase in the number of properties being listed for sale. A net balance of +23 respondents reported more new instructions in April than in previous months, the highest since September 2020. This rise suggests that more homeowners are feeling confident about selling their properties, possibly motivated by the gradual market recovery post-pandemic.
Sales Activity Shows Mixed Signals
While buyer enquiries have dipped, the actual sales figures tell a slightly more positive story. The agreed sales indicator saw a small improvement in April, moving from a net balance of -5 last month to +5. This is the most favorable reading since May 2021, yet it only represents a minimal increase, hinting at a fragile recovery in sales activity.
Short and Long-Term Sales Expectations
Looking ahead, the short-term outlook isn’t very optimistic. Influenced by changes in the financial markets and the Bank of England’s monetary policies, the net balance for sales expectations over the next three months has dropped to -1, indicating a potentially stagnant period ahead. This is the lowest reading since October 2023. However, there’s still a glimmer of hope for the longer term, with a net balance of +33 respondents feeling positive about the next twelve months, although this is a decrease from last month’s +46.
The Lettings Market
The lettings market is also facing its own set of challenges. There’s a continued decrease in tenant demand, coupled with a scarcity of landlord instructions. The net balance for new landlord instructions remained negative at -13, a slight improvement from -18 the previous month. Despite these challenges, rents are expected to keep rising, with a net balance of +33 predicting increases, albeit at the slowest pace in three years.
Expert Insights
Simon Rubinsohn, RICS’ chief economist, notes the sensitivity of the sales market to interest rates and affordability challenges. He notes that even minor increases in mortgage rates have dampened buyer enthusiasm significantly. However, Rubinsohn remains optimistic about the market’s resilience and expects an increase in activity later this year and into 2025, despite the looming general election.
He also points out the growing affordability issues in the lettings market, which have slowed the pace of rent increases. A persistent problem across much of the country is the imbalance between demand and supply, which continues to hinder market growth.