The number of new buyers rose for the seventh consecutive month in March, according to the latest RICS Residential Market Survey.
Meanwhile the number of new properties coming to the market rose for the first time in a year.
Overall, sentiment remains strong with agents expecting property prices to keep rising – albeit at a more modest rate.
On the rental front the number of available properties increased for the first time in almost two years (since July 2020).
But the number of renters boomed again, so rents are expected to rise by 4% in the coming year.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said: “Property buyers are unflinching in the face of headwinds that are surely reaching gale force by this stage.
“They’re withstanding horrendous hikes in bills, rapidly rising interest rates and concerns over the conflict in Ukraine, to snap up increasingly expensive homes.
“On the face of it, this resolute enthusiasm for property seems to fly in the face of common sense, but if you can afford it, there are still some very good reasons to buy.
“Some of this comes down to where we’ve come from. There has been such a dire shortage of properties for so long, that demand has built up. When a new property comes to market, it triggers a wave of existing buyers into action. It’s not until that demand has been sated that we’re likely to see activity cool.
“Meanwhile, mortgages still remain affordable. Despite rates rising, and people having to borrow more, the fact that mortgage rates remain low by historic standards means that people are still weighing up the cost and deciding that it’s worth it. The average two-year fixed rate has jumped to 2.95%. However, if you’re borrowing £200,000 over 25 years, you’re still paying a mortgage of under £950 a month.
“If you compare that to rental costs, you can see the attraction. The HomeLet rental index for new rents in March, put the average UK rent at £1,078 a month. And rents are on their way up too. The RICs survey showed that booming tenant numbers is pushing them up, and are expected to continue to do so for the rest of the year.
“If you wait to buy a first property, you’ll end up spending more on rent, and even then we’re not seeing any widespread conviction that house prices will actually fall – so you could still see property get more expensive.
“And while inflation is causing all sorts of problems for everyone, it has a hidden benefit for mortgage borrowers, because it erodes the value of your debt. Anyone borrowing this time last year will have seen inflation eat up 7% of the real value of their debts – even before you factor in any repayments.
“Sentiment plays such a vital role in the market that it’s always difficult to identify exactly what’s going to force the market to turn. There are some strong contenders. We may get to a stage where inflation makes life too difficult for buyers, or where interest rates make mortgages unaffordable.
“Another possibility is that buyers and sellers remain keen, but mortgage lenders throw a spanner in the works. We’ve already seen lenders starting to factor in higher prices to their affordability calculations.
“Over time it could mean borrowers struggle to get enough cash to afford higher prices, which will take some of the heat out of the market regardless of buyer enthusiasm.”
