The latest RICS survey shows the housing market has lost momentum as buyer demand and agreed sales have moved into negative territory, putting the much-heralded post Stamp Duty recovery into reverse.
Simon Rubinsohn (pictured), RICS Chief Economist, says uncertainty over the Chancellor’s looming Autumn Budget is raising concerns among both buyers and sellers.
New buyer enquiries posted a net balance of -6% in July, down from +4% in June. Weaker demand trends were reported in East Anglia, the South East and the South West.
Sales deteriorating
The survey also revealed a net balance of -16% for agreed sales in July, down from -4% in June. Respondents envisage a generally flat near-term sales outlook, with a net balance of just +1% compared to +7% previously.
Looking twelve months ahead, however, sentiment is more positive, with +8% of contributors anticipating a pick-up in sales activity.
New listings showed marginal growth, with +9% of respondents citing an increase in the flow of properties coming onto the market.
Prices edging lower
House prices fell nationally, with a net balance of -13%, down from -7% in each of the previous two months.
Prices, though, continue to rise in Northern Ireland, Scotland and the North West, with East Anglia experiencing some of the most significant prices falls.
The somewhat flatter tone to the feedback to the July RICS Residential Survey highlights ongoing challenges facing the housing market.”
Rubinsohn says, “The somewhat flatter tone to the feedback to the July RICS Residential Survey highlights ongoing challenges facing the housing market. Although interest rates were lowered at the latest Bank of England meeting, the split vote has raised doubts about both the timing and extent of further reductions.
“Meanwhile, uncertainty about the potential contents of the Chancellor’s autumn budget is also raising some concerns. Against this backdrop, respondents continue to report that the market remains particularly price sensitive at the present time.“
Rental squeeze continues
In the lettings market, tenant demand held steady in the three months to July, with a net balance +4%, although the negative trend in landlord instructions continued and the net balance of -31% is the weakest since April 2020. And the lack of supply coming through means rental prices are anticipated to continue to rise over the next three months by a net balance of +25% of survey participants.
Industry reacts
Only some vendors are recognising the need for realistic pricing.”
Jeremy Leaf, north London estate agent and a former RICS chairman, says: “Only some vendors are recognising the need for realistic pricing in order to attract attention in view of stock overload, with much of it overpriced, particularly smaller one- and two-bed flats and larger houses. Agreed sales are mostly holding supported by falling mortgage rates and a stable employment environment.”
And on lettings, he says, “We noticed that demand has dropped over the past month or so especially for two-bed flats in older buildings, with more interest in modern, lower maintenance properties. Landlord rent expectations are often elevated although they are starting to become more flexible on pricing even though we are finding that fewer are
wanting to sell.”
Sales numbers need to improve.”
Tomer Aboody, director of specialist lender MT Finance, says: “Lower mortgage rates have helped fuel confidence among those looking to take a step onto, or move up, the housing ladder. However, further rate cuts are needed to encourage further activity. Transaction numbers are lower than in previous years as a result of higher Stamp Duty and taxes imposed by the Chancellor in her last budget.
“Sales numbers need to improve as this will benefit the wider economy, not just the housing market. Some encouragement is required via a reform in stamp duty to encourage those moving up the ladder, as well as those downsizing, to take the plunge.”