Commentators have suggested a market “normalisation” may be underway as RICS reported new buyer demand across the UK fell for the seventh consecutive month in November – but new data from Rightmove has suggested the early part of December may have bucked this trend.
RICS’ November 2022 UK Residential Survey said overall activity “continues to weaken across the sales market”, with interest rate hikes and the macroeconomic outlook both to blame.
They say the net balance of buyer demand now sits at -38%, though it must be said this is less negative than the -53% reported in October. However, RICS said the trend, at least for now, remains “firmly downward”.
Yet, Rightmove this morning revealed buyer demand (enquiries made with estate agents) over the past two weeks sits 4% above the same period in 2019, leading to their prediction that the market will settle into a more normal pre-pandemic level of activity as 2023 progresses, accompanied by a modest price drop of 2%.
As well as this, the portal said the number of views of homes for sale on Rightmove is up 11% compared to this time last year, something they say is a sign there are many potential movers who are monitoring the market in detail and weighing up their options.
One explanation for the disparity in RICS’ and Rightmove’s data may be that the former’s data focuses on November whereas the latter’s focuses on the latter part of November and the early part of December, meaning the impact of any fall in rates and steadying effect of Chancellor Jeremy Hunt’s policies may be reflected to a greater extent in Rightmove’s data.
As for other indicators of the market’s momentum, RICS said agreed sales also sit at a net balance of -35% – though this is also less negative than the reading of -45% seen in October.
The survey’s measure of new instructions coming onto the sales market also remains in negative territory, posting a net balance of -9% at the national level. That said, given the drop-off in sales volumes of late, average stock levels on estate agents books ticked up marginally in November (moving from 34 to 35 properties).
With regards to house prices, RICS said a net balance of -25% of survey participants witnessed a fall at the national level over the month – the lowest reading since May 2022.
This is reinforced by Rightmove’s data for November which revealed the average price of a property coming to market fell by 2.1% over the month. Similarly, Halifax’ latest house price index for November found house prices fell by -2.3% in November (vs -0.4% in October) to an average of £285,579 – the biggest monthly drop since October 2008 and the third consecutive fall.
While this is a stark fall, annual growth still sits at a healthy +4.7%. Kim Kinnaird, Director, Halifax Mortgages, urged those in the industry to remember context:
“When thinking about the future for house prices, it is important to remember the context of the last few years, when we witnessed some of the biggest house price increases the market has ever seen. Property prices are up more than £12,000 compared to this time last year, and well above pre-pandemic levels (+£46,403 vs March 2020).
The market may now be going through a process of normalisation. While some important factors like the limited supply of properties for sale will remain, the trajectory of mortgage rates, the robustness of household finances in the face of the rising cost of living, and how the economy – and more specifically the labour market – performs will be key in determining house prices changes in 2023.”
Simon Rubinsohn, Chief Economist, RICS, said:
“The overall tone of the latest RICS Residential Survey is understandably more downbeat than previously, reflecting the uncertain macro environment and the higher cost of mortgage finance.”
However, Rubinsohn added that “anecdotal comments from respondents capture the very real significant divergences in market behaviour at a more localised level”.
“Although property values have dropped momentarily, the market continues to be higher on an annual basis despite the fact that we continue to face ongoing challenges but some of which are purely seasonal” said Managing Director of Barrows and Forrester James Forrester, adding:
“Many will also be quick to flag these drops as a sign that a property market crash is looming, but this amounts to little more than scaremongering.
It’s important that we view recent declines in context, as we are now merely starting to see a return back to pre-pandemic norms. 2023 will; not see a significant fall in house prices, mark my words, because stock remains short, new build homes are virtually non-existent in supply, and the long-term mortgage rates are easing as quickly as they recently rose.”
*Net balance data
Net balance = Proportion of respondents reporting a rise in prices minus those reporting a fall (if 30% reported a rise and 5% reported a fall, the net balance will be 25%).
The net balance measures breadth (how widespread e.g. price falls or rises are on balance), rather than depth (the magnitude of e.g. price falls or rises).
