Easing mortgage rates buoy housing market as house price declines slow

Cheaper mortgages are starting to have a positive impact on the housing market with declines in national house prices slowing and sales expectations for the year ahead the most positive since January 2022, the Royal Institution of Chartered Surveyors reveals today.

But despite the overall rosier outlook the RICS Residential Market Survey shows sales in the near terms are only marginally positive and other indicators remain in negative territory.

DEMAND FALLING

Buyer demand is still falling with the net balance reading for new buyer enquiries coming in at -14% in November but that’s the least negative figure since April 2022.

For agreed sales, the latest national net balance of -11% compares with a reading of -23% in October and suggests the downward trend in sales volumes is easing.

East Anglia, the Northwest and Northern Ireland are showing strong buyer demand while London’s new buyer enquiries have turned less negative (-12 from -31) as have other areas such as Wales (-9 from -57) although Yorkshire and Humber and the North have seen further falls.

In the lettings market, although tenant demand continues to rise the supply challenge remains with landlord instructions remaining in decline.

LESS NEGATIVE

Simon Rubinsohn, RICS Chief Economist, says: “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.”

Tom Bill, Head of UK Residential Research at Knight Frank, says: “Strong wage growth is normally positive for the UK housing market but not this year.

November was more active than September in the property market.”

“As inflation falls and borrowing costs stabilise, the unusual result is that November was more active than September in the property market.”

He adds: “Speculation is turning to the timing of a bank rate cut rather than the size of the next rise, providing a boost to sentiment that means transaction volumes should be higher over the next six months than the last six.

“The key uncertainty now is political ahead of a general election next year.

“Not only the uncertainty of when it will be called but a familiar question of whether the government will be forced into action sooner rather than later due to internal divisions.”

Read the full report HERE.