The February 2023 RICS UK Residential Survey continues the trend of being generally downbeat. However, there are several indicators demonstrating a more stable picture emerging through the course of 2023.

This reassuring prospect is also evident in some of the anecdotal remarks from survey participants stating how a more optimistic February has given the housing market some hope for the coming months after a sluggish start to the year.

Most significantly, the headline reading for new buyer enquiries rebounded to a net balance of -29% (measured on a seasonally adjusted basis), improving from -45% in January. While this metric is still signalling a decline in demand, and represents the tenth consecutive negative monthly reading for new buyer enquiries, it is also the least negative result since July 2022.

House prices remain on a downward trajectory, and are expected to see further falls through the first half of the year at least.”

The new sales indicator was also less negative in February, improving from a net balance of -36% to -26%. However, the average time taken to complete sales continues to rise and is now approaching 19 weeks.

In an additional question included in the latest survey, RICS analysed the difference between the asking price and sales price in the current macro climate. In the mainstream market (covering prices up to £500k), around 60% of respondents suggested that prices were being agreed at below the asking price. For properties priced between £500k and £1 million, the share jumped to just over 70%.

Rental market outlook

In lettings, tenant demand continues to increase with a net balance of +32% reported.

Significantly, landlord instructions continue to decline, says the report, although at a lesser pace than in the recent months at -13%. Inevitably, given the ongoing imbalance, the headline rent expectations reading remains at a relatively high level of +45%. Moreover, this pattern is repeated across much of the country.

Tarrant Parsons of RICS commented, “The housing market continues to adjust to the tighter lending climate, with stretched mortgage affordability still weighing heavily on activity.

“Given the ongoing weakness in demand, house prices remain on a downward trajectory, and are expected to see further falls through the first half of the year at least.

“Going forward, near-term expectations suggest market activity will remain generally subdued over the coming months, although the latest survey feedback shows tentative signs that the ongoing decline in buyer enquiries is now moderating”.

Commenting on the RICS survey, Knight Frank’s Tom Bill said, “The further we get from the mini-Budget, the more things improve in the UK housing market. Asking prices will continue to come under pressure as buyers recalculate what they can afford but the market is not about to go over a cliff.

“The weak start to the year for mortgage approvals means bigger lenders will be focussed on market share, which will keep downwards pressure on rates but the key for buyers is the overall sense of stability rather than movements in borrowing costs that are likely to be small.

“Transaction levels will come down from the heights seen during the pandemic and we expect prices to fall by a few percent but the evidence is that 2023 will be a solid year for the housing market.”

Click here to see the full RICS Residential Market Survey