The housing market is in the “grip of macro headwinds stemming from the Middle East conflict” and, with interest rate rises on the horizon, the outlook for buyers remains challenging, according to the Royal Institution of Chartered Surveyors (RICS).
The comments in the latest RICS UK Residential Market Survey mirror sentiment shared in recent weeks by both Nationwide and Halifax in their respective house price indices; a subdued market is expected in to the short and medium term as a result of “higher mortgage rates and wider geopolitical uncertainty continuing to weigh on buyer demand and sales activity.”
The monthly sentiment survey tracks the RICS community’s view on market demand and supply. This month, continued negative sentiment predicts “subdued conditions… over the coming months, while the outlook for the year ahead has also softened noticeably.”
New buyer enquiries remained firmly negative in April, recording a net balance of -34%, albeit slightly improved from -40% recorded in March. Agreed sales also remained weak, with a net balance of -36%, broadly unchanged from -35% previously. Sales expectations for the next three months registered -32%, while twelve-month sales expectations softened to -6%, marking a move into marginally negative territory.
On the supply side, two months of neutral and then negative responses to questions about future pipeline suggests listings could weaken with the new appraisals measure falling to -16%, down from zero the previous month. This is starting to show in new instructions which were broadly flat said RICS; new instructions recorded a net balance of -3%.
The consensus amongst surveyors in London, the South East, East Anglia and the South West is that pricing will continue to come under pressure. The North of England may fare better, with marginally positive readings from respondents .
RICS head of market research and analysis, Tarrant Parsons, said: “April’s results show a housing market still in the grip of macro headwinds stemming from the Middle East conflict.
“Recent warnings from the Bank of England that interest rate rises may be required to tackle renewed inflation, driven by elevated oil prices and disrupted supply chains, underline the challenging environment facing buyers. Until there is a clearer path for inflation and borrowing costs, activity and sentiment look set to remain subdued, particularly across southern England and London where affordability pressures are most acute.”
Many of the members RICS spoke to for its report referenced the conflict in the Middle East affecting confidence. In London, Roshan Sivapalan MRICS of Blakes Surveyors, said: “Ongoing Middle East uncertainty and recent mortgage rate increases are suppressing sales activity. However, demand persists for realistically priced stock, and the market continues to function where pricing aligns with buyer expectations.”
Confidence is proving more resilient in the North of England, as illustrated by Neil Foster MRICS of Hadrian Property Partners in Northumberland.
He said: “The sales market shuddered at the start of conflict in the Middle East, and the continued (relatively) high cost of borrowing has suppressed the investment market. However, sales activity appears to be reviving, and we expect May to yield an increase in activity.”
