RICS: No signs of short-term property market improvements

Property professionals remain negative about the prospects for the housing market over the coming months amid low buyer demand and fewer market appraisals but there is slightly more long-term optimism.

The Royal Institution of Chartered Surveyors’ (RICS) latest UK Residential Survey for September highlights the continuation of a challenging market backdrop, with interest rates hampering mortgage affordability.

The headline new buyer enquiries figure reported a net balance reading of -39% in September, with most parts of the UK in negative territory.

Although still consistent with weak demand, the latest reading is marginally less negative than the -46% figure seen in the August data.
 
Respondents were slightly less downcast about agreed sales, with a -37% reading reported.

For the coming three months, respondents continue to predict a decline in sales volumes, even if the latest net balance moved to -24% from a more negative reading of -36% for the prior month. 

The volume of new listings has also continued to decline, according to the RICS report, with a net balance reading of -17% in September. 

As such, new instructions have now reportedly fallen in each of the past three months, resulting in average stock levels on estate agency books at 38 properties since July. 

Respondent’s feedback continues to suggest that the number of market appraisals is below last year so any immediate changes in supply levels available across the market seem unlikely, RICS said.

On a more positive note, 12 month sales expectations have turned positive, with a net balance of +3%, up from -5% in August.

The report said this signals a more stable trend in sales volumes emerging over the year ahead. Some respondents noted the freeze on interest rate rises contributing to a slightly more positive picture.

House prices remain on a downward trajectory at the national level though with a net balance of -69% signalling a decline.

Expectations for house prices are less negative over 12 months though. A national net balance of -33% of contributors foresees prices continuing to fall, although the September reading is slightly less downcast compared to readings of closer to -50% returned through June to August this year.  
 
Tarrant Parsons, senior economist at RICS, said: “With mortgage affordability still incredibly stretched, it is unsurprising that buyer activity across the housing market remained subdued in September. 

“Although the decision to pause monetary policy tightening a few weeks ago provided a glimmer of relief for the market, interest rates are likely now set to remain on hold for a prolonged period. As such, it appears there is little prospect of trends deviating much from the recent picture in the immediate future. That said, the outlook a little further ahead has improved slightly, with twelve-month sales expectations moving out of negative territory for the first time in several reports.”

Commenting on the report, Tom Bill, head of UK residential research at Knight Frank, said: “A sense of predictability is returning to the UK housing market, which means buyers and sellers can better come to terms with higher mortgage rates. 

“House prices will continue to come under pressure but we think most of the correction will happen this year as demand hardens. The General Election may limit housing market activity next year but modest single-digit annual growth should return from 2025."