RICS’ latest UK Residential Market Survey suggests a deterioration in sales activity is on the horizon as June saw new buyer enquiries slip to an eight-month low in the face of rising mortgage rates.
As borrowing costs continue to rise, many of June’s survey results have fallen deeper into negative territory in terms of net balance* readings.
Indeed, new buyer enquiries slipped to a net balance of -45%, down from -20% in May, which is the lowest reading recorded since October 2022 (-51%). Respondents across all parts of the UK reported a “firmly negative” trend in buyer enquiries compared to May.
For newly agreed sales, the net balance fell to -34% this month, which is notably weaker than the figure of -8% in May. In fact, June’s return represents the most downbeat figure since December 2022, when the net balance stood at -38%.
The survey indicator representing trends in house prices nationally – a reading relied on for its accuracy by Goldman Sachs, the Financial Times, and others – declined to a net balance of -46% from the -30% seen in May, with price expectations now standing in “firmly negative territory” at both the three and 12 month forecast markers.
Significantly, of those who held a view on the subject, 58% of survey participants noted that homes with better energy efficiency credentials are holding their value in the current market, highlighting the growing importance of sustainability within the housing sector.
“The latest increase in interest rates and the impact this has already had on mortgage rates is clearly visible in the key RICS metrics regarding buyer enquiries, sales and prices which have all retreated over the past month,” commented Simon Rubinsohn, RICS Chief Economist:
“Inevitably in this environment, activity levels are likely to remain relatively subdued. However, an important message coming back from RICS agents is around ensuring prices are set with an eye on the market conditions of today, rather than the recent past; when this is done, sales are taking place.
It is also worth bearing in mind that house prices are only very modestly down on their recent highs and well above where they stood prior to the onset of the pandemic.
Further declines are possible but need to be seen in the context of the previous strength in the market. Additional questions included in the latest survey also provide some support for the notion that, on balance, properties with better energy efficiency credentials are holding their value better than some others”.
*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%)
One Response
This cannot be a surprise. I am currently only really seeing cash transactions or porting matters. Those taking out a new mortgage are seemingly in the minority and will continue to be until the interest rates come down. Frankly, anyone would be foolish to willingly take out a 6% mortgage at present considering the noises coming from the Bank of England and the Government that they want to reduce that significantly. This has caused significant problems in the housing market and without intervention (proper intervention, not the nonsense they have been spouting) this will continue into next year. I hope that the stakeholders involved in the housing market have ensured their financial viability for the next 12 months without layoffs following the boom over the last 3 or 4 years.