Residential property sales in August dropped for a second month in a row, but are expected to stabilise in the coming months, the latest findings of the RICS UK Residential Market Survey shows.

There is clear evidence that the pace of house price growth is starting to ease, but with a relatively flow of new listings coming onto the sales market, the signs are that prices will rise further over the next months, albeit at a reduced rate of growth.

New buyer enquiries fell, with a net balance of -14% of respondents saying they had seen even fewer house hunters. This follows on from a -9% reading in July.

Agreed property sales also declined at the same time, with a net balance of -18% reporting a fall.

Looking forward, respondents were more optimistic about the market’s prospects, with sales over the next three months expected to stabilise – net balance of +4% – before returning to modest growth – +7% net balance – when looking over the next year.

On a regional level, the responses show sales expectations for the year ahead are most positive across London, Northern Ireland and the South East of England.

New listings were down again with a net balance of -37% reporting yet another fall – with eight of the last nine months seeing new listings in negative territory. It is not much surprise that stock levels on agent’s books have therefore dropped from an average of 42 homes per branch at the start of 2021, to stand at 38 in August, getting close to near record lows.

As a result of demand outpacing supply, respondents continued to report strong rates of house price inflation – with a net balance of +73% saying they’d seen prices increase since the previous month’s survey. Looking to the year ahead, a net balance of +66% said they don’t expect prices to continue rising at a national level, the same reading reported in July.

Tarrant Parsons, RICS economist, said: “The latest survey evidence inevitably points to market activity taking a breather following the flurry of sales seen ahead of the tapered stamp duty holiday withdrawal. That said, while momentum has eased relative to an exceptionally strong stretch earlier in the year, there are still many factors likely to drive a solid market going forward.

“Nevertheless, given the real shortfall in new listings becoming available of late, there remains stong competition amongst buyers and this is maintaining a significant degree of upward pressure on house prices. What’s more, prices are expected to continue to climb higher over the year to come, albeit the pace of increase is likely to subside somewhat in the months ahead.”

Tenant demand for homes to rent also accelerated in August, with a net balance of +66% reporting a pick-up in enquires (up from the +58% in the previous month). However, a continuing decline in landlord instructions fuelled expectations among survey respondents (net balance of +64%) that rents will go up over the next three months given this imbalance between supply and demand.

Bradley Tully, senior public affairs officer at RICS, commented: “RICS was supportive of the stamp duty holiday as a response to unique market circumstances last year during the height of the pandemic, though the scope of the holiday was arguably broader than we had anticipated and it should have been allowed to expire as originally intended.

“Over the long-term, RICS believes that an overhaul of stamp duty land tax should ultimately be delivered. Indeed, earlier this year the House of Commons Treasury Select Committee recommended that reforming stamp duty should be a priority for the government in their report, ‘Tax After Coronavirus’.

“We would urge the government to undertake a full-scale review of the current stamp duty land tax system to assess future ideal outcomes in terms of factors such as revenue generation and housing market fluidity. Housing affordability for first-time buyers and key workers should remain a crucial factor when considering access to the market too.”