House prices stablilising as sales market recovers, report RICS

Buyer demand is continuing to rise as the seasonal bounce begins to kick in with many agents expecting sales activity to pick up as house prices start to stabilise, the latest RICS UK Residential Survey reveals this morning.

Some +8% of agents reported an increase in new buyer enquiries during March – the most positive result since February 2022. While on the property supply front, the RICS UK Residential Survey shows the flow of new listings coming onto the sales market increased for a fourth successive month.

Expectations of rising sales volumes have more than doubled since last month (+13% from +6%) and house price trends grew less negative for the seventh month in a row, rising from a net balance of -67% in September 2023 to -4% in March.

LETTINGS

In the lettings market RICS reports tenant demand as modestly positive in March although landlord instructions were still down despite a third (+34%) of agents expecting rents to rise in the next three months.

Tarrant Parsons, RICS Senior Economist, says: “Demand continues to recover gradually across the UK housing market, with new buyer enquiries rising for a third month in succession according to the latest survey feedback.

“With the inflation backdrop turning a little less difficult of late, this has led to expectations that the Bank of England will be able to start lowering interest rates later in the year. This should continue to support the market to a certain degree going forward.

“In keeping with this, near-term sales expectations point to an improving outlook, albeit the scope for an acceleration in activity will still be relatively limited given mortgage rates are set to remain much higher than in 2020/21”.

SEASONAL BOUNCE

Tom Bill, head of UK residential research at Knight Frank, says: “There will be a seasonal bounce in the UK housing market this spring, it just won’t be as strong as the one expected in January.

“While falling headline inflation and mortgage rates sparked a ten-week recovery that ran into the early weeks of this year, the housing market has drifted for last ten weeks due to stubborn underlying inflation and the fact mortgage rates have crept higher.

“The rising cost of borrowing, the increase in supply and the fact a wave of borrowers are rolling off sub-2% mortgages from early 2022 mean house prices are currently moving sideways. We expect inflation to slowly come under control and more sub-4% mortgages to appear later this year, meaning UK prices should increase by 3% in 2024.”

REGIONAL REACTION

Neil Foster, Partner at Hexham-based Hadrian Property Partners, says: “Investor sentiment in the holiday rental sector has taken an obvious turn for the worst post budget but that does not unconditionally open the door to aspiring buyers for whom prices remain unfeasibly high, especially with such tight supply in rural areas.”

John Haigh, Director at Lister Haigh in Knaresborough, adds: “With interest rates stabilising, the confidence in the housing market is growing with buyers and sellers, knowledgeable local agents and realistic pricing, creating a busy time.

“Knaresborough and Harrogate with its good connections to York and Leeds make the Yorkshire Golden Triangle forever desirable.”

Andrew Wallis, Commercial Director at Black Grace Cowley on the Isle Of Man, says: “Spring has seen some increased activity in the £2m+ price bracket on the Isle of Man, also an increase in interest from overseas buyers.

“Looking to take advantage of the relative low tax environment and maximum tax cap for high net worth individuals maybe?”

And Edward Bagnall, Partner at Tayler and Fletcher in  Stow-On-The-Wold, says: “The market is best guaged by a recent auction.

“Good interest before the sale, three competing buyers, hammer price 5% above guide. Both underbidders subsequently they wished they had bid more on the night! Otherwise, our private treaty sales are all exchanging but taking longer than they should.”