In November 2023, the RICS UK Residential Survey depicted a cautiously optimistic scenario for the housing market. A slight relief in mortgage rates recently contributed to a more positive sentiment.
Nonetheless, the near-term sales outlook remains only marginally upbeat, and other market indicators continue to show negative trends.
Nationally, the new buyer enquiries net balance stood at -14% in November, the least negative since April 2022, indicating a decline in buyer demand but at a slower pace.
Regionally, the situation is varied, with the Northwest and Northern Ireland reporting positive figures. London and Wales also showed improvements, though Yorkshire and Humber and the North experienced declines.
The latest national net balance for agreed sales is -11%, a sign of easing in the sales volume decline. East Anglia, the Northwest, and Northern Ireland are witnessing positive trends.
Short-term sales expectations for the next three months have turned positive for the first time since early 2022, at +6%. Looking further ahead, the 12-month sales forecast is more optimistic, with a +24% net balance of respondents anticipating sales improvements, the most positive since January 2022.
House price sentiment, while still negative at -43%, is less so compared to previous months. This suggests an ongoing decrease in house prices but at a reduced rate.
In the rental market, tenant demand continues to rise, albeit at a slower rate (+20% of respondents), and the supply challenge persists due to declining landlord instructions. Rental prices are expected to increase by approximately 4% over the next year.
Simon Rubinsohn, RICS chief economist, said: “The latest RICS Residential Market Survey provides further evidence that sentiment is a little less negative than previously was the case with, critically, the new buyers enquiries indicator finally beginning to stabilise.
“This is being aided by increased confidence that the interest rate cycle has peaked which is reflected in somewhat more competitive mortgage products coming to the market.
“However, with the cost of money likely to remain elevated for some time to come and the economic outlook still downbeat, it is not surprising that the overall tone to the anecdotal remarks from survey respondents is still quite cautious.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, added: “These figures confirm what we’ve seen in recent surveys as well as in our offices over the past quarter – write the housing market off at your peril.
“Increases in demand confirm buyers are encouraged by recent reductions in inflation and mortgage payments complemented by a growing belief that the worst for house prices may be behind us, or at least not far off.
“Better-than-expected mortgage approval and transaction numbers in October and November as well as healthy employment and wage growth are also supporting activity. We don’t expect to see much change in the next few months, rather a gradual improvement, particularly as extra optimism always seems to be in evidence at the start of a new year.”
Tomer Aboody, director of property lender MT Finance, concluded: “With mortgage rates reducing slightly, confidence and affordability are improving.
“Buyers are looking to take advantage of a recent slower market which in turn has meant that some sellers are happy to accept a lower price, or at the very least are more open to negotiations.
“An increase in supply is needed next year to further boost the housing market. With this in mind, it could be time for some government intervention, possibly in the form of a stamp duty revamp.”
Reaction
Emma Cox, MD of Real Estate at Shawbrook:
“The market outlook is beginning to look slightly more positive despite economic challenges and high interest rates, which is reflected in positive portfolio activity.
“With strong rental demand still outweighing quality stock, landlords have remained optimistic despite market conditions. According to recent research from Shawbrook, 88% of portfolio landlords have added further properties to their portfolios in the past six months, despite ongoing market uncertainty, and a further quarter intend to within the next year. This number may increase further if interest rates begin to decrease in the New Year.
“Now may be a good time for landlords to work with specialist lenders to explore the options available to them in order to future-proof their strategies against any further challenges in 2024.”
