Seasonal spring bounce in UK housing market ‘point to an improving outlook’

There has been a steady improvement in sentiment, with buyer demand and sales expectations going forward seeing a rise in positivity. Meanwhile, stability in house prices has also been reported.

According to the latest RICS UK Residential Survey, buyer demand has continued to rise, with a net balance of +8% of respondents citing an increase in new buyer enquiries during March, making this the most positive result since February 2022.

On the property supply front, the flow of new listings coming onto the sales market increased for a fourth successive month, with a net balance of +13% of respondents noticing a pick-up in new instructions in March.

Looking at expectations, respondents predict further improvement in activity over the coming months, with a net balance of +13% of respondents predicting sales volumes rising in the next three months, compared to a reading of +6% previously. Similarly, looking ahead to the next twelve-months, a net balance of +46% of respondents predict sales activity rising (up from +42% in February).

Interestingly, house price trends have grown less negative for the seventh month in a row, rising from a net balance of -67% in September 2023 to -4% in March. This suggests a stable picture is now in place for house prices across the UK.

Moving across to the lettings market, the question relating to tenant demand remained modestly positive in March, at a net balance of +19 (+16 last time round). On the opposite side, landlord instructions once again show a weak net balance reading of -19. Consequently, +34% of survey respondents still expect rental prices to rise in the next three months.

Last week, the UK government’s ‘Levelling Up, Housing and Communities (LUHC) Committee’ announced the launch of an inquiry into the home buying and selling process, which will look at if the current processes are fit for purpose and what can be done to make improvements.

RICS senior public affairs officer, Sam Rees, commented: “As the activity in the housing market increases, we welcome the inquiry into how the home buying process can be improved for consumers.

“RICS members working as agents and surveyors play a vital part in providing professional advice, ensuring that consumers are well informed on what for many is the most expensive purchase they will make. Their expertise will help shape the RICS recommendations and evidence to the inquiry committee this month.

“As a founding member of the Digital Property Market Steering Group, we are already working across the sector to identify ways that consumers and industry professionals can have access to the necessary information needed to buy and sell a home, reducing fall throughs and transaction times.”

Tarrant Parsons, senior economist, RICS, commented: “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.”

Tom Bill

Reflecting on the latest data from RICS, Tom Bill, head of UK residential research at Knight Frank, acknowledged that there will be a seasonal bounce in the UK housing market this spring, but he believes it will not be as strong as the one expected in January.

He remarked: “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.”

Jeremy Leaf, north London estate agent, added: “Buyers and sellers are emerging from an extended hibernation, which resulted in a subdued market for much of last year. Better weather is coinciding with much more interest than we have seen for several months.
Jeremy Leaf
“However, the increased choice of properties is making it more difficult for buyers to make up their minds as they worry about missing out on an alternative. As a result, decision-making is more protracted and bargaining is harder so sales are taking longer. Prices are firming up but concerns about affordability are keeping a lid on sellers who think that more viewings will lead to much higher values.
“On the lettings side, affordability constraints are certainly playing their part with the pressure for higher rents building as supply is still not keeping up with demand. However, the quality of interest remains low, resulting in considerable additional checks to ensure tenants can pay their way for the length of the tenancy at least.
“Gently rising rents are the likely outcome and certainly the sharp increases seen last year are probably a thing of the past for the next few months at least.”

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