New buyer enquiries lifted to a balance of plus-7% last month, up from minus-3% in December, and is the strongest in almost two years, data from the Royal Institution of Chartered Surveyors shows.
The outlook for sales volumes over the next twelve months has “improved, influenced by expectations of future interest rate cuts by the Bank of England,” adds the surveyor body’s latest monthly Residential Market Survey.
It says the rise in buyer enquiries “is consistent with a gradual recovery for buyer demand, and while relatively modest, it is the strongest demand since February 2022”.
Agreed sales in January also saw a rise in sentiment, with respondents reporting a balance of plus-5% from minus-5% the month before.
Over the longer term, a balance of plus-14% of respondents said sales would pick up over the next three months, with plus-44% believing volumes will rise over the coming year.
House price expectations came in at minus-18%, indicating continuing market falls.
The survey says: “However, this result has strengthened for five successive months, and is the strongest reading since October 2022.
“London stands out as exhibiting a more stable trend for prices this month. Likewise, respondents based in Scotland and the North West of England cited a generally flat picture in recent months.”
In the rental market, plus-28% of contributors reported seeing an increase in tenant demand in the three months to January.
The report points out: “This rise was the most modest since January 2021. In parallel, respondents again noted a decline in the volume of new landlord instructions, with the net balance remaining at minus-18% for a second consecutive quarter.”
It adds that the imbalance between supply and demand is still expected to drive rental prices higher over the coming months, although this figure has eased to plus-41% — down from readings of plus-52% and plus-61% in the two previous quarters.
Rics senior economist Tarrant Parsons says: “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 regard 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.”
MT Finance director Tomer Aboody points out: “With expected cuts to interest rates to come this year, the market is reacting positively with more sellers looking to take advantage of the upturn in confidence.
“Numerous mortgage rate reductions mean affordability is starting to seem more realistic for those buyers who have been waiting a while and are keen to get on with their moves.”
Hargreaves Lansdown head of personal finance Sarah Coles says: “This is the first glimpse of buyer enthusiasm we’ve seen in this report for ages, and it’s enormously welcome.
“Miserable levels of demand have been a permanent feature for the best part of two years, so this is a real departure.
“More positive sentiment has helped to boost the number of agreed sales, which is music to the ears of those who have been struggling to shift their home.”
Coles adds: “Renters have seen horrible rental price hikes, and there’s no end to the misery in sight.
“The number of tenants looking for a place to live has grown yet again, while the number of properties available to rent shrinks. There’s just not enough property to go around, so rents are going to keep rising.”
