The December 2023 RICS UK Residential Survey results indicate a gradual improvement in market sentiment, likely influenced by the recent easing of mortgage interest rates. Near-term sales expectations have shifted positively, while house price trends are expected to flatten over the next twelve months.
The survey showed a slight rise in buyer demand, with the new buyer enquiries indicator registering -3%, compared to -13% previously. This marks a move into neutral territory for the first time since April 2022, following four months of increasingly less negative returns.
Newly agreed sales figures also suggest a less negative market, with the national net balance at -6%, the least negative since early 2022. Short-term sales expectations have risen to +12%, up from +7%, and a solid recovery in residential sales volumes is expected over the next year, indicated by a net balance of +34%.
The average time to complete a sale is also decreasing, now averaging 18 weeks, down from 20 weeks in September. New instructions remained stable, with a flat net balance of +1%, and average property listings per estate agent holding at 39, up from 34 at the start of 2023.
House price declines are moderating nationally, with the headline house price gauge posting a net balance of -30% in December, less negative than in previous months. Most regions still exhibit negative readings, but Northern Ireland reported an increase in house prices.
Near-term price expectations remain slightly negative at -13%, but respondents now anticipate house prices to stabilise nationally over the year ahead, with a net balance of zero.
In the lettings market, tenant demand rose, but demand growth has softened recently. With scarce landlord instructions, the lack of available rental properties continues to drive rental prices upward. Near-term rent rise expectations are at +50%, with longer-term projections suggesting a near 4% increase over the next year and an average 5% annual rental growth over the next five years.
Reaction
Emma Cox, MD of real estate at Shawbrook, said: “The gradual improvement in the market, falling mortgage rates and a rise in tenant demand will provide landlords with confidence in 2024.
“Despite tough economic conditions and uncertainty over the past 12 months, landlords have continued to add to their portfolios to cater for the needs of the rental market, which continues to grapple with a lack of suitable and available properties.
“However, landlords may need to act quickly to close transactions and secure new properties. A surprise increase in inflation may prevent the anticipated interest rate cuts which in turn could halt the lowering of mortgage rates.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“Although inflation may have picked up, the downward trend has prompted a reduction in mortgage rates and lender appetite which in turn has helped to increase activity.
“Buyers and sellers are gaining confidence from an expectation that the worst of the market may be behind us, supported by still-strong employment numbers.
“Looking forward, we don’t expect any massive changes but certainly firming prices and more sales agreed than we perhaps dared to expect only a few months ago.”
Tomer Aboody, director of property lender MT Finance:
“As lenders look to reduce mortgage rates in order to increase lending volumes, buyers are definitely feeling more confident in their ability to buy, both due to affordability but also with the possibility of more stock coming onto the market.
“2023 was an incredibly flat year for sales, with multiple factors affecting the market, from interest rates rises and high inflation to low stock levels. Better sentiment is expected with encouraging prospects for the year ahead.”
Steve Griffiths, chief commercial officer at The Mortgage Lender:
“A tentative feeling of optimism continues in the property market as recent outlooks point to a revival in 2024. December’s report from RICS reflects this renewed confidence as sales expectations continue on their positive track.
“Buyer enquiries and sales activity are also showing cause for optimism and with house prices now predicted to outpace initial forecasts in 2024, and mortgage rates already coming down, the property market looks set to return to business as normal this year.
“For those planning their property purchases in 2024, seeking advice early from a broker will ensure they understand how much they can afford to borrow allowing them to jump on opportunities as they present themselves.”
