Hope springs eternal as housing market bounces back, says RICS

New buyer enquiries rose by 7% in January from a fall of 3% in December as demand fuelled by cheaper mortgage rates continued to swell to levels not seen since February 2022, the RICS UK Residential Market Survey reveals today.

The number of sales agreed also swung into the positive from -5% to +5% with agents believing sales will pick up between now and May and almost half (44%) believing that sales volumes will increase over the next 12 months.

TENANT DEMAND

In the lettings market nearly a third (28%) of agents reported seeing an increase in tenant demand in the three months to January although new landlord instructions were also down – that imbalance between supply and demand expected to drive rental prices higher over the coming months.

Tarrant Parsons, RICS Senior Economist, says: “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.”

But he warns: “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.”

MORE POSITIVE

Tom Bill, Head of UK Residential Research at Knight Frank, says: “Leading indicators of demand have turned more positive and we expect the number of mortgage approvals and exchanges to catch up this spring.

“As inflation falls faster than expected, the improved outlook for rates on money markets means lenders have dropped their prices, irrespective of how cautious the Bank of England is sounding.

“We expect a 3% rise in UK house prices this year despite the presence of some inflationary pressures and rising political volatility.”

And he adds: “Pressure on landlords is unlikely to ease in an election year, which means low supply, high demand and more financial pain for tenants.

“The Renters (Reform) Bill, or any future incarnation under a new government, risks aggravating the imbalance by deterring landlords, so politicians need to be aware of the risks as well as the rewards of intervention.”

HOUSE PRICES

Yesterday Halifax reported that house prices rose by 1.3% in January with the average house is now worth £291,029 – the fourth monthly rise in a row, with prices increasing by 2.5% annually.

And elsewhere, latest research from eXp UK reveals that there has been an 80% annual increase in the number of homes entering the market in the last two weeks across Britain as seller confidence continues to grow.

Adam Day, Head of eXp UK, says: “There is a clear and undeniable momentum building across the British property market.

“Mortgage approvals are on the up, interest rates seem to have peaked and expected to fall this year and sellers are reacting to this growing market sentiment in order to take advantage of growing buyer demand levels.”