The recent report from the Royal Institution of Chartered Surveyors (RICS) sheds light on a continuing trend of muted residential sales, while highlighting a contrasting surge in the rental sector.

The Slowdown in Residential Sales

September 2023 did not bring much-needed momentum to the UK’s housing market, as buyer activity persisted in its “subdued” state, according to RICS’s latest UK Residential Survey. The net balance of agreed sales for the month stood at a negative 37 per cent, indicating a decline in the number of properties being sold compared to those remaining on the market.

A Glimpse of Optimism?

Despite the gloomy sales data, the report hints at a silver lining. The negativity surrounding sales has slightly diminished compared to the sentiments in August and July. Tarrant Parsons, a senior economist at RICS, pointed out that while mortgage affordability issues continue to dampen market enthusiasm, the recent decision to halt the tightening of monetary policy offers a glimmer of relief.

However, the respite might be short-lived, as Parsons cautioned that interest rates are poised for a long standstill. This stagnation implies that the immediate future may not hold significant deviations from the current market lethargy. Although near-term expectations suggest a continued decrease in sales volumes, the latest data shows a less negative outlook, with the net balance improving to -24 per cent from the previous month’s -36 per cent.

Hope on the Horizon?

Looking further ahead, the market’s prospects appear to be brightening. For the first time in several reports, the 12-month sales expectations edged into positive territory, registering a net balance of +3 per cent, an uplift from the prior -5 per cent. Contributors to the survey attribute this cautious optimism in part to the freeze in interest rate hikes, hinting at a potentially more stable economic landscape for buyers.

Persistent House Price Declines

The RICS report wasn’t all about sales; it also delved into the realm of property values. September saw the continuation of a downward trend in house prices, with a net balance of -69 per cent, barely changed from August’s -68 per cent. This consistency suggests that the rate at which prices are falling has stabilized, albeit at a pessimistic level.

A Patchwork of Property Values

The national average doesn’t tell the whole story, as the report underscored significant regional variations. While house prices are dropping in almost all areas of the UK, the south-east and West Midlands are bearing the brunt of these declines. This geographical disparity underscores the importance of local market knowledge for potential investors and homebuyers.

The Rental Market: A Different Story

Contrasting starkly with the sombre sales sector, the lettings market is buzzing with activity. September saw a robust increase in tenant demand, with a net balance of +43 per cent of survey participants reporting a rise. Compounding this demand pressure, the market faces a dearth of available listings, with a net balance of -24 per cent indicating scarce rental options.

Upward Pressure on Rents

This supply-demand imbalance in the rental market is set to exert upward pressure on rents. Survey respondents anticipate close to a 5 per cent increase in rental prices across the UK over the next 12 months. For potential investors, this suggests that the rental sector might offer lucrative opportunities, despite the overall housing market’s current volatility.