Homebuyer enquiries fell in August at the steepest rate since the early stages of the pandemic as the cost-of-living crisis and wider economic challenges affected market conditions, according to surveyors.
The Royal Institution of Chartered Surveyors (RICS) residential survey also predicts that the number of homes sold over the next 12 months is set to fall at the highest rate seen in at least a decade.
The industry body said its members have also seen price growth reduce to the slowest pace seen since January 2021 and they now expect prices to level off.
Looking to the 12 months ahead, sales expectations are the most downbeat they have been since RICS started collecting the data in 2012, with a balance of 45% of property professionals expecting falls.
In the lettings market, tenant demand continues to rise, with a net balance of 50% of contributors seeing an increase in tenant demand over the month.
Alongside this, the latest net balance for landlord instructions came in at minus 13%, indicating falling supply across the rental market.
RICS said that given this excess of demand over supply, rents are expected to rise in the near term. When viewed over the next 12 months, rents are anticipated to rise by close to 4% across the UK.
Tarrant Parsons, a senior economist at RICS, said: “Concerns over the economic backdrop and rising interest rates continue to take their toll on market momentum, with strong activity early in the year now giving way to a more subdued picture.
“Moreover, given projections for the UK economy point to a potential recession emerging towards the end of 2022, respondents envisage housing sales continuing to slip in the coming months.
“For the time being at least, the lack of stock available on the market is still providing support to house prices, which continue to rise, even if the pace of growth has cooled over recent months.”
Reaction
Tomer Aboody, director of property lender MT Finance:
“The simple economic equation of supply and demand is maintaining steep house prices, with ready buyers still looking to make a move and take advantage before interest rates rise even higher.
“With so much uncertainty set to come over the next 12 to 24 months, the market will start to stabilise but whether there is a crash remains to be seen.
“There would need to be high sales volumes at lower prices for that to happen but with inflation rising there will be worried homeowners who bought in the past few years. Let’s hope Liz Truss’ appointment results in some quick assistance to manage the pain.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“It’s becoming increasingly clear – and not just at the coalface – that the shortage of stock is continuing to support prices but at the same time disguising the impact of the rising cost of living on the rest of the market.
“Another problem is that demand can disappear if not satisfied fairly quickly so prices may soften further.
“Nevertheless, we’re not seeing widespread renegotiations or buyer withdrawals so don’t expect a significant correction yet although the market is certainly more price sensitive than a few months ago.”
