The January 2024 RICS UK Residential Market Survey was released this morning and it revealed further improvements in key metrics across the board.

In particular, the outlook for sales volumes over the next twelve months improved, influenced by expectations of future interest rate cuts by the Bank of England.

Nationally, new buyer enquiries were + 7% in January, up from -3% in December. This result is consistent with a gradual recovery for buyer demand, and while relatively modest, it is the strongest demand since February 2022. Further to this, agreed sales also saw a rise in sentiment, tilting positive from -5% previously to +5%.

Even more encouragingly, respondents see sales picking up over the next three months, with +14% on balance stating that they believe rises are coming. Longer-term, the positivity increases with +44% believing that sales volumes will increase over the next twelve months.

House prices at a national level returned a result of -18%, indicating continuing price falls overall. However, this result has strengthened for five successive months, and is the strongest reading since October 2022. London stands out as exhibiting a more stable trend for prices this month. Likewise, respondents based in Scotland and the North West of England cited a generally flat picture in recent months.

In the lettings market, +28% of contributors reported seeing an increase in tenant demand in the three months to January. That said, this rise was the most modest since January 2021. In parallel, respondents again noted a decline in the volume of new landlord instructions, with the net balance remaining at -18% for a second consecutive quarter. The imbalance between supply and demand is still expected to drive rental prices higher over the coming months, albeit the figure for this eased a touch to +41% – down from readings of +52% and +61% in the two previous quarters.

RICS senior economist, Tarrant Parsons, said: “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.

“However, 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.”

Following the release of the latest RICS Residential Market Survey this morning, Tom Bill, head of UK residential research at Knight Frank, commented: “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.”

With regards to lettings, he added: “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.”