Market Report: Recent recovery in buyer demand stalls somewhat with a flatter picture cited for May 2024...
- Buyer demand reportedly flat, while near-term sales expectations soften slightly.
- National house prices remain stable, with twelve-month projections still in expansionary territory.
- New listings coming onto the market continue to rise.
Residential Sales
The April 2024 RICS UK Residential Market Survey results show the recent recovery in buyer demand stuttering slightly, with the market seemingly impacted by the slight upward move in mortgage rates over the past few weeks.
Nevertheless, forward-looking sentiment continues to point to a stronger picture for sales market activity coming through over the next twelve months. With respect to new buyer enquiries, the headline net balance for this indicator softened to -1% in April, down from a reading of +6% previously.
As such, this brings to an end a run of three consecutive positive monthly results beforehand, with the latest return indicative of a broadly flat trend. That said, the feedback around buyer demand is mixed at the regional level, with any loss of impetus mainly concentrated in London and Southern parts of England.
Meanwhile, the agreed sales metric did improve slightly in April, posting a net balance reading of +5% compared to -5% last month. Although the latest return does in fact mark the most positive reading since early 2021, it is consistent with only a marginal up-tick in monthly sales volumes.
With financial markets recently paring back expectations around the potential scale of monetary policy loosening this year, near-term sales expectations appear to have been adversely affected. Indeed, the net balance for sales expectations over the coming three months dipped to -1%, marking the weakest reading since October 2023 (and now signalling a more or less stagnant near-term picture). Nevertheless, respondents still foresee a stronger trend in sales activity coming through at the twelve-month horizon, even if expectations have turned a little more moderate (net balance +33% vs +46% last month).
Looking at the supply available on the market, a net balance of +23% of contributors noted an increase in the flow of new instructions during April. Significantly, this represents the most elevated figure for the new listings gauge since late 2020. Furthermore, average stock levels have now picked up to a three-year high, at 43 properties per branch. Going forward, the pipeline for new instructions appears solid, evidenced by a net balance of +20% of respondents reporting that market appraisals are up on an annual comparison.
For the headline house price indicator, the April net balance was unchanged from last month, registering a figure of -5%. Once again, this is signalling a largely stable trend in house prices at the aggregate level. Moreover, virtually all parts of England returned either a flat or marginally negative reading for the house price series. By way of contrast, both Northern Ireland and Scotland continue to see an upward trend in house prices.
Over the near-term, sentiment around the outlook for prices has turned a little more cautious as the national three-month expectations net balance slipped to -13%. Even so, twelve-month expectations remain consistent with house prices returning to growth at the aggregate level, posting a net balance of +38% in April (identical to the reading seen in March). When broken down, all parts of the UK are anticipated to see some uplift in house prices at the twelve-month time horizon.
Lettings
In the lettings market, the latest feedback suggests tenant demand growth continues to lose momentum. In the three months to April, a net balance of +12% of survey participants reported a rise, easing from a reading of +28% and marking the least positive value since April 2020 (part of the quarterly seasonally adjusted lettings dataset). Alongside this, landlord instructions remain in short supply, with the latest net balance of -13% again, pointing to a weak picture. Going forward, rents are still seen rising by a net balance of +33% of respondents, albeit this marks a three-year low for the near-term rental growth expectations metric.
Ray Smith, FRICS – Senior Officer & Business Leader comments on the latest UK Market Report
“A stall can always be expected the month after a budget, lenders increase mortgage costs and there is a bank holiday in the month. Our sense of things is that buyers have paused and will go again.
There hasn’t been a rush away from furnished holiday lets following the tax changes announced in the budget, a further indication that buyers and sellers are making considered decisions in the face of a fast-changing market and in the main are tweaking the plans rather than shelving them.
The rental market, although still buoyant, has stabilised over the last quarter. The surge in rents to unprecedented levels has resulted in decreased tenant demand, with renters opting to stay in their current accommodations for longer periods and delaying moves. Additionally, housing stock continues to dwindle as landlords struggle with their costs, even with elevated rental rates.
To rebalance the market, additional housing stock is essential, and the government must take proactive steps to incentivise landlords and enhance the market’s attractiveness. Otherwise, tenants will bear the brunt, facing escalating rents and a constrained selection of rental properties.
In the Mortgage Valuation market, we are seeing a lot of re-financing whether that be for small businesses looking to enter the market as start ups or more experienced property investors looking to take advantage of deals that are coming to the market through the many Auction Houses across the country”.
