RICS Residential Market Survey: prices remain firm but sales outlook weakens

RICS Residential Market Survey: prices remain firm but sales outlook weakens

The April RICS Residential Market Survey shows that would-be buyers are still on the hunt for a new home, whilst stock levels and new listings remain scarce. This means that house prices continue to be pushed higher across all parts of the UK.

This month +10% of respondents reported a rise in new buyers’ enquiries, the eighth successive month in which the survey has returned a positive net balance. However, looking at the number of new properties being listed for sale, respondents have once again reported a subdued trend in listings, -1% of respondents said that new listings were falling instead of rising, albeit this projects a more or less steady picture during the month. Elsewhere agreed sales were flat having risen in each past two months, returning a net balance of -2% in April.

Due to the imbalance between demand and supply, it’s unsurprising that stock levels remain extremely low (38 per agency). Also, the number of appraisals being undertaken has seen little change compared with the same period twelve months ago, which does not seem to bode well for the flow of supply coming onto the second-hand market. The supply vs demand difference also means that house prices have once again risen across all parts of the UK. This month, +80% of respondents reported an increase in house prices, up from +74% in March.

Looking ahead, contributors are anecdotally preparing themselves for some market adjustments given the recent rate rise and the pressure on household budgets. That said, near-term sales expectations remain positive, as a net balance of +12% of respondents anticipate a rise in sales over the next three months. Looking to the year ahead, the net balance has eased for the fourth consecutive report and now -4% expect sales to fall, however, this is signalling a flat trend on the whole.

When looking to the future of house prices, contributors expect prices to continue to rise, albeit to a lesser degree than in previous reports. Looking forward to the next year, +62% anticipate prices to rise, but this is down from +78% in the February survey.

RICS Economist, Tarrant Parsons, commented:

“Despite growing macro headwinds in the form of cost-of-living pressures and higher interest rates, the UK residential market continues to see modestly positive trends in new buyer enquiries. For the time being at least, even though there is a lot of caution about the future economic landscape, it seems that limited supply available on the market, coupled with steady demand growth, are still the overriding drivers of house prices. As such, there is little evidence at this stage of house price inflation losing much momentum, while expectations for the coming twelve months have only moderated slightly from recent highs.”

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown commented:

“Caution crept into the property market in April, as buyers, sellers and lenders started to get more uneasy about the future.

Some agents reported that they were having to do an awful lot of legwork for sales, as prospective buyers took their time making a decision. Several of them said that buyers and sellers were getting increasingly cautious, and one said that every single buyer now asks  just how much longer price rises can continue.

Meanwhile, one agent in the report said that buyers were starting to struggle to get mortgages, and that lenders were uncomfortable with the immediate outlook for the market. There’s also a good chance that they’ve changed their affordability criteria to take account of rising costs, which is making it more difficult for people to stretch themselves. Another agent said this  is causing some chains to fall apart, as mortgage companies don’t think properties are worth their asking price.

However, the number of properties going up for sale has dropped again, which is going to keep prices rising. Almost every agent complained that they didn’t have enough homes on their books. It means that we can expect sales to ease off and price rises to slow rather than anything more seismic.”

Annie Simmons

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