The most recent RICS survey paints a concerning picture of the UK housing market. In July, there was a 45% decline in new buyer enquiries, mirroring a similar slump in June. All regions of the UK have been impacted by the current downturn. Moreover, agreed property sales for the month plummeted by 44%, a low reminiscent of the early days of the Covid pandemic, as outlined in the RICS residential report.
The overall outlook for sales appears to be growing more pessimistic. The survey indicated a distinctly negative reading of -45% for sales expectations. July also saw the ‘new instructions’ net balance deteriorate, dropping from -3% in June to -13%.
However, on the rental front, the three months leading up to July observed a robust increase in tenant demand, with a +54% reading of respondents noting a surge. In contrast, instructions from landlords receded further, showing a net balance that declined from -24% to -30%. With these dynamics at play, 63% of the survey participants predict a hike in rental prices in the forthcoming quarter.
Simon Rubinsohn, RICS Chief Economist, commented, “The feedback from our latest residential survey suggests that the recent boost in mortgage activity might soon wane. The ongoing slump in new buyer enquiries is a clear indication of the hurdles faced by potential buyers, particularly in this era of economic volatility, escalating interest rates, and a stricter credit environment.” He expressed concerns about the potential spike in rents amidst the prevailing cost of living crisis.
Tom Bill, Head of UK Residential Research at Knight Frank, provided a slightly brighter perspective. He said, “Supply has seen a surge in certain regions, mainly because owners who couldn’t secure their asking price are now opting to rent out their homes, hoping for a stronger sales market in the future.”
Jeremy Leaf, a north London estate agent and ex-RICS residential chairman, shared insights from his own experience. He stated, “This report somewhat aligns with our observations on the field. External factors such as the ongoing cost-of-living worries and persistently high interest rates have hindered activity. However, there’s a budding optimism that both these factors might have reached their zenith. This has spurred a renewed vigour among buyers, especially first-timers beleaguered by skyrocketing rents.”
Tomer Aboody, director at MT Finance, added, “Rising rates have strained affordability even further, slowing down sales as buyers eagerly anticipate the Bank of England’s next move and the possibility of mortgage lenders showing more flexibility. The upcoming months are crucial. With the base rate possibly peaking, the onus now lies on banks and government intervention to reinfuse optimism into the market.”