The latest findings from the January 2024 RICS UK Residential Market Survey have sparked optimism in the housing sector, showcasing a series of improvements across crucial market indicators. A standout revelation from the survey is the positive shift in sales volume expectations for the upcoming year, buoyed by the anticipation of interest rate reductions by the Bank of England.
January witnessed a notable increase in new buyer inquiries, jumping to +7% from a -3% dip in December, marking the highest level of buyer demand since February 2022. This gradual yet steady recovery is mirrored in the sentiments around agreed sales, which have swung from a -5% to a +5% positivity rate.
The short-term forecast is equally promising, with a +14% balance of respondents predicting sales increases over the next three months. The long-term outlook is even brighter, with +44% expecting a surge in sales volumes over the next twelve months.
Price Trends and Regional Insights
Despite the overall price index sitting at -18%, indicating a continuation of price declines, this figure represents a five-month consecutive improvement and the strongest since October 2022. London, in particular, is showing signs of price stabilisation, while Scotland and the North West of England report a generally flat price trend in recent months.
Lettings Market Dynamics
The lettings sector is witnessing its own set of challenges and opportunities. The demand from tenants has risen modestly, with a +28% increase reported over the last three months — the most modest rise since January 2021. Conversely, new landlord instructions have not kept pace, maintaining a -18% net balance for the second quarter in a row. This imbalance between supply and demand is expected to push rental prices upward, though the pace may slow slightly, as indicated by a decrease in the anticipated rental price increase to +41% from previous, higher forecasts.
Expert Commentary
Tarrant Parsons, RICS senior economist, highlights the sustained improvement in buyer activity, “The UK housing market has seen a continued improvement in buyer activity through the early part of the year, supported by the recent easing in mortgage interest rates. Although sales volumes through much of the year ahead are likely to remain relatively subdued compared to the longer-term average, the outlook has now turned modestly brighter on a consistent basis over the past few survey reports. “However, this is not to say that mortgage affordability isn’t still a significant challenge, and any further unwelcome surprises with regards to inflation may still cause interest rate expectations to be revised. That would then pose a significant risk to any prospective recovery in the months ahead, even if the current prognosis is for the market to see a further pick-up in activity levels.”
Tom Bill, head of UK residential research at Knight Frank, anticipates a 3% rise in UK house prices this year, driven by a more positive demand outlook and lower-than-expected inflation rates. However, he warns of challenges, particularly for the lettings market, where political decisions could exacerbate supply-demand imbalances.
Jeremy Leaf, a north London estate agent, underscores the impact of the declining inflation on increasing lender appetite and mortgage affordability, fostering a tentative market recovery, especially for family homes. Leaf advises caution among sellers, emphasising that an increase in viewings does not necessarily translate to more offers.