The latest RICS UK Residential Survey points to an improved outlook for the housing market. This improvement in sentiment is supported by a small easing in mortgage rates over recent weeks.
However, sales in the near term are only marginally positive, and other indicators remain in negative territory.
At the UK level, the net balance reading for new buyer enquiries came in at -14% in November. While this signals buyer demand is still falling, it is the least negative figure since April 2022.
When viewed at a regional level, feedback is mixed regarding new buyer enquiries, with positive readings in both the Northwest, and Northern Ireland. London’s new buyer enquiries have turned less negative (-12 from -31), as have other areas such as Wales (-9 from -57), however Yorkshire and Humber and the North have seen further falls.
For agreed sales, the latest national net balance of -11% compares with a reading of -23% in October and suggests the downward trend in sales volumes is easing. East Anglia, the North West, and Northern Ireland are all seeing positive figures.
Looking ahead, near-term sales expectations over the next three months improved with the first positive reading since early 2022 (+6).
At the twelve-month time horizon sales expectations are much more positive with a net balance of +24% of respondents foreseeing an improvement in sales activity, marking the most upbeat return for this forward-looking measure since January 2022.
House price sentiment has also turned less negative with a net balance of -43% in November. While this continues to signal a fall in house prices, this sentiment has improved over the last three months.
In the lettings market, although tenant demand continues to rise according to 20% of respondents, this marks the most modest reading since January 2022.
However, the supply challenge remains with landlord instructions remaining in decline. Going forward, while twelve-month expectations have eased somewhat of late, rents are still projected to rise by close to 4% at the headline level over the next year.
RICS chief Economist, Simon Rubinsohn says the latest RICS survey provides further evidence that sentiment is a little less negative than previously was the case with, critically, the new buyers enquiries indicator finally beginning to stabilise.
“This is being aided by increased confidence that the interest rate cycle has peaked which is reflected in somewhat more competitive mortgage products coming to the market”.
However, he adds: “With the cost of money likely to remain elevated for some time to come and the economic outlook still downbeat, it is not surprising that the overall tone to the anecdotal remarks from survey respondents is still quite cautious.”
Former RICS residential chairman and London estate agent Jeremy Leaf says: “These figures confirm what we’ve seen in recent surveys as well as in our offices over the past quarter – write the housing market off at your peril”.
He adds: “Increases in demand confirm buyers are encouraged by recent reductions in inflation and mortgage payments complemented by a growing belief that the worst for house prices may be behind us, or at least not far off. Better-than-expected mortgage approval and transaction numbers in October and November as well as healthy employment and wage growth are also supporting activity”.
Leaf does not expect to see much change in the next few months, rather a gradual improvement, particularly as extra optimism always seems to be in evidence at the start of a new year.
MT Finance director Tomer Aboody says that with mortgage rates reducing slightly, confidence and affordability are improving. “Buyers are looking to take advantage of a recent slower market which in turn has meant that some sellers are happy to accept a lower price, or at the very least are more open to negotiations”.
“An increase in supply is needed next year to further boost the housing market. With this in mind, it could be time for some government intervention, possibly in the form of a stamp duty revamp.”
Shawbrook managing director of real estate Emma Cox points out that with strong rental demand still outweighing quality stock, landlords have remained optimistic despite market conditions.
“According to recent research from Shawbrook, 88% of portfolio landlords have added further properties to their portfolios in the past six months, despite ongoing market uncertainty, and a further quarter intend to within the next year. This number may increase further if interest rates begin to decrease in the New Year”.
