The latest RICS UK Residential Survey results suggest a slight softening in the recent resurgence of buyer demand, primarily attributed to the uptick in mortgage rates. However, despite this moderation, survey respondents maintain an overall positive outlook for sales market activity in the next 12 months.
The RICS survey serves as a sentiment indicator, capturing trends based on the net balance of opinions among the surveyed surveyors. This nuanced approach provides insights into market dynamics and sentiment shifts, helping to discern emerging patterns and potential future developments.
Overall, while the market may be influenced by fluctuating mortgage rates, the underlying sentiment remains cautiously optimistic, with expectations of continued activity in the residential property sector in the foreseeable future.
In April, there was a noteworthy shift in the net balance for new buyer enquiries, moving from a positive +6 to a slightly negative -1. This change signified the end of three consecutive months of positive results, painting a picture of a more subdued market compared to previous periods. Interestingly, regional feedback on buyer demand presented a mixed picture, with a notable loss of momentum predominantly observed in London and various parts of Southern England.
Meanwhile, when examining the number of properties available on the market, there was a notable uptick. A net balance of +23 respondents reported an increase in new instructions during April. This figure represents the most positive observation since September 2020, suggesting that sellers are increasingly confident about listing their properties amidst improving market conditions following the disruptions caused by the pandemic. This rise in new instructions reflects a growing sense of optimism among property sellers as they perceive a more favorable environment for transactions.
In April, there was a slight uptick in the agreed sales indicator, with a net balance reading of +5 compared to the previous month’s figure of -5. While this represents the most positive reading since May 2021, indicating a marginal increase in monthly sales activity, the pace of growth remains subdued.
The recent fluctuations in financial markets, particularly the reassessment of expectations regarding potential monetary policy adjustments by the Bank of England throughout the year, have had a dampening effect on short-term sales outlooks. This adjustment in expectations has led to a decline in the net balance for sales expectations over the next three months, dropping to -1. This figure is notably the lowest recorded since October 2023, suggesting a stagnant near-term outlook for sales activity in the residential property market.
Despite the modest improvement in the agreed sales indicator, market sentiment remains cautious amidst ongoing economic uncertainties and the evolving landscape of monetary policy. While some regions may have experienced slight gains in sales activity, particularly in areas where market conditions have been relatively resilient, there is still a prevailing sense of caution among buyers and sellers alike.
The mixed regional feedback on buyer demand, with a noted loss of momentum observed primarily in London and Southern parts of England, adds further complexity to the market dynamics. However, the increase in new instructions during April, as indicated by a net balance of +23 of respondents, suggests a growing confidence among sellers. This uptick in new listings represents the most positive figure recorded since September 2020, indicating a potential shift towards a more active market as sellers become increasingly comfortable with listing their properties amidst improving market conditions following the disruptions caused by the pandemic.
Respondents express optimism for future sales activity despite a slight decrease in confidence, with a net balance of +33 indicating expectations of a robust market over the next twelve months, down from +46 last month.
In the lettings market, tenant demand shows signs of weakening, while landlord instructions remain scarce, with a net balance of -13 (-18 last month), indicating a subdued landscape.
Rental growth expectations remain positive, albeit at a three-year low, with a net balance of +33 anticipating rent increases in the near term.
Simon Rubinsohn, RICS’ chief economist, notes the market’s sensitivity to interest rates, citing a modest increase in mortgage pricing contributing to stagnant buyer enquiries and cautious near-term expectations.
“That said, there is still a strong perception that activity in the market will pick up in the latter part of the year and into 2025, irrespective of any political uncertainty around the general election.
“As far as the lettings market is concerned, an increasing number of respondents are also drawing attention to affordability constraints, and this is reflected in a more modest pace of rental growth. But a fundamental problem in the market across much of the country remains the imbalance between demand and supply with new instructions continuing to decline”.
