The January 2024 RICS UK Residential Market Survey reveals notable improvements in the UK housing market, with key indicators such as buyer demand, agreed sales, and new instructions showing positive trends. The survey indicates a shift in sentiment with these metrics moving out of negative territory, reflecting a more optimistic outlook for the property market.
Buyer demand in January saw an increase to +7%, a significant improvement from -3% in December, marking the strongest demand since February 2022. Agreed sales also experienced a positive shift, moving from -5% to +5%, suggesting a growing confidence among buyers and sellers. The survey further highlights an optimistic future sales volume outlook, with a +14% net balance of respondents expecting an increase over the next three months and a +44% net balance over the next twelve months.
Despite the overall house price index remaining negative at -18%, the trend indicates a gradual easing of house price declines, with this being the strongest reading since October 2022. London, in particular, is showing signs of price stability, contrasting with the ongoing price adjustments in other regions.
The lettings market is also experiencing changes, with a +28% net balance of respondents reporting an increase in tenant demand over the past three months, although this is the most modest increase since January 2021. The survey notes a continued decline in new landlord instructions, maintaining a -18% net balance for the second consecutive quarter. This imbalance between supply and demand suggests that rental prices are likely to continue rising, albeit at a slower pace than in previous quarters.
Tarrant Parsons, RICS senior economist, said: “The UK housing market has seen a continued improvement in buyer activity through the early part of the year, supported by the recent easing in mortgage interest rates. Although sales volumes through much of the year ahead are likely to remain relatively subdued compared to the longer-term average, the outlook has now turned modestly brighter on a consistent basis over the past few survey reports.
“However, this is not to say that mortgage affordability isn’t still a significant challenge, and any further unwelcome surprises with regards to inflation may still cause interest rate expectations to be revised. That would then pose a significant risk to any prospective recovery in the months ahead, even if the current prognosis is for the market to see a further pick-up in activity levels.”
Reaction
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“The faster-than-expected drop in inflation has increased lender appetite, exerted downward pressure on mortgage rates and prompted more demand, especially for family houses as part of a tentative market recovery.
“Looking forward, the prospect of Budget goodies is also helping to raise confidence, particularly while employment remains so strong.
“Expectations are growing that house prices have passed their low point and over-optimism will stop any recovery in its tracks. Sellers need to recognise that more viewings doesn’t necessarily result in more offers.”
Tomer Aboody, director of property lender MT Finance:
“With expected cuts to interest rates to come this year, the market is reacting positively with more sellers looking to take advantage of the upturn in confidence.
“Numerous mortgage rate reductions mean affordability is starting to seem more realistic for those buyers who have been waiting a while and are keen to get on with their moves.”
