House sales ‘expected to rise modestly and gain further momentum’ after prices stabilise

 Conveyancing firms may see an uptick in business as new data suggests that homeowners are ‘on the move’, as house prices become more stable.

The February 2024 RICS UK Residential Survey shows a more positive picture for sales than was the case for most of last year.  According to the survey ‘near outlook is still cautious, in part due to the suspicion that the recent easing in mortgage rates is likely to stall on the back of ongoing uncertainty about the timing and speed of interest rate reductions’.

At the UK level, new buyer enquiries stayed positive for the second successive month (+6% net balance) showing a continued upwards trend in buyer demand.  Looking at regions across the UK, most have now shown a recovery in buyer interest over the last two months.

Agreed sales were flat in February (-3% net balance) and although this is less positive than in January it still signals a stronger trend in sales than was evident in most of the last 12 months (average net balance of -22%). Looking ahead, the sales expectations for the near term are positive, and sales activity is expected to gain further momentum over the coming year (net balance +42%) In addition, respondents across all UK regions/countries foresee residential sales activity picking up over the longer-term time horizon.

Simon Rubinsohn, Chief Economist, RICS, commented:

“The February RICS survey provides some grounds for encouragement around the sales market with not just buyer interest staying positive for the second successive month but also the uplift in new instructions to agents. Whether the increase in stock coming back to the market will be sustained is likely to be a critical factor in explaining how things play out over the balance of the year especially with new build likely to remain constrained.

“Significantly, the rise in the number of appraisals taking place points in the right direction. And the government will be hoping that this trend is given a boost by the change to CGT announced in the Budget.

“Meanwhile, there are signs that the relentless upward trend in private rents is losing momentum but fresh demand is still comfortably outstripping supply in this area which suggests there is unlikely to any significant relief for tenants. Indeed, feedback from respondents to the survey continue to highlight the challenges in the sector resulting from a whole host of measures introduced in recent years.”

There was a solid rise being reported in new instructions to sell. The latest net balance of +21% represents the strongest reading since October 2020, in contrast to the continuously negative picture cited throughout 2023.

Last year, it was predicted that house prices would have to drop 19.3% to reach pre-pandemic levels. There was talk of a cooling housing market and that prices were starting to decline in Autumn last year. Data has shown that, even after months of economic and market turmoil, the average house price of £287,546 in September of last year would have to fall by -19.3% to return to its pre-pandemic level o£ 231,940 in January 2020.

Average stock levels on estate agents books now sit at 42 properties, the highest since February 2021, with respondents noting an increase in market appraisals over the month relative to the same period last year.

House prices still point to a downward trend across the UK as a whole, but this is stabilising with the February figure the least negative since October 2022. In London, the turnaround in the price indicator is slightly more pronounced. Looking ahead, a net balance of +36% of respondents across England and Wales now envisage house prices returning to growth at the twelve-month time horizon.

Earlier this year, house prices slowed and fell a further to 0.8 %. After a successful January, the property market looked promising for the remainder of the first quarter. The rate of the fall in house prices had slowed to -0.8%, according to Zoopla’s latest House Price Index, with all activity measures up year on year. This has improved since recording a -1.4% low in October.

In the lettings market, tenant demand continues to rise but at a rather more modest pace than previously. At the same time, however, landlord instructions are still dwindling, meaning respondents envisage rents moving higher over the coming months albeit at a slower rate.

Simon Rubinsohn, Chief Economist, RICS, commented:

“The February RICS survey provides some grounds for encouragement around the sales market with not just buyer interest staying positive for the second successive month but also the uplift in new instructions to agents. Whether the increase in stock coming back to the market will be sustained is likely to be a critical factor in explaining how things play out over the balance of the year especially with new build likely to remain constrained.

“Significantly, the rise in the number of appraisals taking place points in the right direction. And the government will be hoping that this trend is given a boost by the change to CGT announced in the Budget.

“Meanwhile, there are signs that the relentless upward trend in private rents is losing momentum but fresh demand is still comfortably outstripping supply in this area which suggests there is unlikely to any significant relief for tenants. Indeed, feedback from respondents to the survey continue to highlight the challenges in the sector resulting from a whole host of measures introduced in recent years.”