The Royal Institution of Chartered Surveyors (RICS) has released its residential survey for the UK, covering September 2023. The report outlines a market that continues to face challenges, with interest rates hampering mortgage affordability and a tightening lettings supply pushing up rental prices.
The headline figures reveal weak demand for new buyers, with a reported figure of -39% in September. However, this is a slight improvement from the -46% seen in the previous month. Agreed sales also remain negative, with a reading of -37% for September, which is better than August’s and July’s respective figures of -46% and -45%.
Tarrant Parsons, senior economist at RICS, said: “With mortgage affordability still incredibly stretched, it is unsurprising that buyer activity across the housing market remained subdued in September. Although the decision to pause monetary policy tightening a few weeks ago provided a glimmer of relief for the market, interest rates are likely now set to remain on hold for a prolonged period.”
Looking ahead, the report suggests that sales volumes are likely to decline in the coming quarter, albeit at a slower rate than before, with the latest net balance improving to -24% from -36% in the previous month. Moreover, the 12-month sales expectations show a net balance of +3%, indicating some stability in sales volumes in the year ahead.
House prices are continuing their downward trajectory, with a net balance of -69% in September, barely changed from -68% in the previous month. The most significant downward pressures were observed in the West Midlands and the South East, with respective net balances of -94% and -91%.
The rental market is seeing increased tenant demand, with a net balance of +43%, while the scarcity of listings from landlords recorded a net balance of -24%. Given these factors, rental prices are expected to rise close to 5% across the UK over the next 12 months.
The RICS report also launched its manifesto for the built environment, calling for the next UK Government to meet housing targets by developing a strategy to increase the supply of rented homes.
Reaction
Jeremy Leaf, north London estate agent and a former RICS residential chairman:Â
“The usually reliable RICS sentiment index remains in ’Eeyore’ mood yet the gloomy outlook for the next three months is no surprise.
“Our offices are finding lower mortgage rates are helping to generate more viewings, particularly for smaller family houses, but they are not falling fast enough yet to make a significant difference to sluggish activity.
“However, buyers are not having it all their own way. Bearing in mind approximately four out of five sellers are also trying to purchase, most are resisting attempts to make any more than modest price reductions to avoid chains collapsing.
“Looking forward, there is optimism that the cost of living – including mortgage rates – will bottom out shortly and encourage more effective demand in the early part of 2024.”
Tomer Aboody, director of property lender MT Finance:Â
“There are welcome indicators that the market is stabilising with more confidence among buyers and sellers prompted by the Bank of England’s decision to hold interest rates.Â
“However, we are not out of the woods just yet with a number of fixed-rate mortgages set to come to an end in coming weeks and months. Those borrowers still face a significant payment shock, even though it may not be as bad as it could have been just a few months ago.
“Unfortunately, for those who can’t cope with the increased payments, we are likely to see more properties come to market, with these forced sales impacting house prices.”
