The housing market is showing signs of stabilising after a difficult start to the year, but uncertainty over interest rates and the Autumn Budget is holding back a stronger recovery.
RICS’ latest Residential Market Survey found buyer demand and agreed sales both improved again during August, although activity remains subdued.
The monthly survey of estate agents and surveyors measures whether respondents are seeing activity rise or fall in their local markets.
Buyer enquiries produced their strongest reading since January and improved for the fifth month in a row. Agreed sales were at their strongest since February, having recovered significantly from their recent low in April.
There are signs of growing confidence in the market’s outlook, too. Expectations for sales over the next three months moved close to neutral, while more respondents now expect sales to increase rather than decrease over the coming year.
RICS Head of Market Research and Analysis Tarrant Parsons says: “August’s results show a market that is gradually finding its footing, with key activity indicators having become progressively less negative over recent months. That said, any potential recovery remains fragile and faces two significant near-term tests.
“The Bank of England’s increasingly hawkish tone, on the back of renewed volatility in global energy markets, is a reminder that the borrowing cost outlook could yet deteriorate further. And with the October Budget approaching, speculation over potential changes to property taxation is adding another source of caution for both buyers and sellers.”
North West bucks the price trend
House prices are still under pressure across most of the country, although the number of surveyors reporting falls has been gradually reducing since April.
There are substantial regional differences, though. London remains considerably weaker than the national average, whereas Northern Ireland is still recording rising prices.
The North West is another notable exception, having experienced what RICS describes as a “sustained period of gentle house price growth in recent months”.
The supply of homes coming onto the sales market has remained broadly flat. New instructions were unchanged in August, and weaker market appraisal activity points to little immediate increase in the number of properties coming up for sale.
Rental pressures building again
The picture is very different in the rental market, where more surveyors are reporting rising tenant demand at the same time as landlord supply is constrained.
The proportion of RICS’ members expecting rents to increase over the next three months rose sharply in August, with surveyors forecasting rental growth of around 3% over the coming year.
Several surveyors linked the shortage directly to landlords leaving the sector. Kevin Henry of Bridgemane Surveyors in Liverpool and Preston told RICS: “Current government policy risks accelerating landlord exits from the sector and putting further upward pressure on rents.”
And in Derby, Ottewell reported: “Demand continues almost unabated. The Renter Rights Act has not helped tenants who have seen a smaller offering of homes to rent as private landlords exit the market.”
And there were similar reports from the West Midlands. Colin Townsend of John Goodwin said: “Rents continue to rise and the trend for landlords with small portfolios of rental properties to sell and leave the market is continuing.”
Looking ahead, RICS expects the imbalance between supply and demand to keep rents rising, with surveyors forecasting average rental growth of around 3% over the next 12 months.
How the RICS survey works
The RICS Residential Market Survey is a monthly survey of chartered surveyors working in residential sales and lettings. Results are expressed as a net balance – the proportion reporting an increase minus the proportion reporting a decrease. The figures measure how widespread rises or falls are rather than the size of the change.
