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July 29

House Prices Set to Rise After 2-Year Decline

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The positive outlook comes from estate agent members of the Royal Institution of Chartered Surveyors (RICS), who report growing confidence now that uncertainties around the general election have passed.

Estate agents are predicting the first house price rises in two years due to falling interest rates. This renewed confidence is reflected in the market, where agents expect increased activity and higher demand from buyers. The reduction in interest rates is seen as a key factor in making mortgages more affordable, which is likely to stimulate the housing market and drive prices up. Overall, the sentiment among RICS members is that the housing market is set to experience a period of growth and stability following the recent election.

The positive outlook comes from estate agent members of the Royal Institution of Chartered Surveyors (RICS), who report growing confidence now that uncertainties around the general election have passed. 

RICS revealed that its measure of residential sales expectations over the next three months has surged to the highest level since early 2022. This improvement in sentiment is largely attributed to the stabilising political landscape and a more predictable economic environment, encouraging both buyers and sellers to re-enter the market. 

As a result, RICS members anticipate that house prices will increase in the near term, marking the first expected rise in two years. This forecast suggests a potential shift in the housing market dynamics, reflecting renewed optimism among property professionals and potential homeowners alike.

The Royal Institution of Chartered Surveyors (RICS) reports a positive outlook for the UK property market. A net balance of +54% of RICS respondents expect house prices to rise over the next 12 months, indicating a shift in sentiment.

Since 2022, the property market has been under pressure from high interest rates, mortgage costs, and the cost of living squeeze caused by rising energy and food bills. These factors have created a challenging environment for both buyers and sellers. However, the latest RICS figures suggest the market is on the verge of improvement as the broader economy starts to recover.

The Bank of England’s Monetary Policy Committee (MPC) is expected to cut the base rate from its current 16-year high of 5.25% in August, with further reductions anticipated later this year. This move is aimed at easing financial conditions and stimulating economic activity. In response to the expected rate cuts, several high street banks have already begun reducing mortgage rates and increasing the maximum size of loans available to borrowers.

This combination of lower mortgage rates and a more optimistic economic outlook is likely to provide a much-needed boost to the housing market. As confidence grows among buyers and sellers, we can expect to see increased activity and potentially higher property prices in the near future.

Tarrant Parsons, senior economist at RICS, observed that despite the housing market’s subdued activity last month, there were some encouraging signs for the future.

Parsons explained, “If the Bank of England concludes that the current inflation backdrop is mild enough to start easing monetary policy next month, we might see a further reduction in lending rates. This could lead to a more favourable borrowing environment for potential homebuyers.”

He also highlighted the recent election’s impact, which resulted in a definitive outcome and has subsequently elevated housing on the political agenda. Labour’s commitment to constructing 1.5 million homes over the next five years is particularly notable, as this target hasn’t been achieved since the 1960s. In addition to this ambitious building plan, Labour is also introducing mortgage guarantees to assist first-time buyers, aiming to make homeownership more accessible to a broader segment of the population.

This renewed focus on housing comes at a crucial time. High interest rates, mortgage costs, and the ongoing cost of living crisis—exacerbated by soaring energy and food bills—have cast a long shadow over the property market since 2022. The RICS figures, however, suggest that the market might be turning a corner as economic conditions improve.

Furthermore, the Monetary Policy Committee (MPC) of the Bank of England is expected to reduce the base rate from its current 16-year high of 5.25 percent in August, with additional cuts anticipated later in the year. This prospective easing of monetary policy is already influencing the market, as several high street banks have begun cutting mortgage rates and increasing the maximum size of loans available.

Parsons’ insights, coupled with Labour’s robust housing agenda, point to a potentially significant shift in the housing market landscape, offering hope for both current homeowners and prospective buyers.

There are significant concerns about whether Britain has enough construction workers to fulfil these promises.

Former RICS chairman, Jeremy Leaf, noted, “The election had limited impact on our buyers and sellers, mainly because the outcome was largely expected. The pace and level of mortgage rate reductions were much more relevant.

“Over the past month, especially since the election result, we have seen a rebound in confidence and activity. However, we are not getting carried away as the increased choice and ongoing economic concerns will keep the higher price aspirations of homeowners in check.”

Sarah Coles, head of personal finance at Hargreaves Lansdown, said, “A new government has brought a sense of optimism to the property market. Agents hope this means sales will pick up and falling house prices will reverse in the coming year. It’s the most positive agents have been about sales since early 2022, and they’re approaching viewings with renewed energy. However, it remains to be seen whether buyers will share their view.

“Agents are hopeful for an upswing in consumer sentiment, driven by the optimism that a change in government can bring, and they hope this will lead to more enthusiastic buyers entering the market. We will have to see if this optimism materialises and encourages more buyers in the coming weeks.”

 

MORE Property blogs HERE: 

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House Prices Set to Rise After 2-Year Decline


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