Housing demand remains 'downbeat' but more stable picture emerging: RICS

The latest RICS residential survey for February continues the trend of being generally downbeat, however there are several indicators demonstrating a more stable picture emerging through the course of 2023.

This reassuring prospect is also evident in some of the anecdotal remarks from survey participants stating how a more optimistic February has given the housing market some hope for the coming months after a sluggish start to the year.

Most significantly, the headline reading for new buyer enquiries rebounded to a net balance of -29%, improving from -45% in January. While this metric is still signalling a decline in demand, and represents the tenth consecutive negative monthly reading for new buyer enquiries, it is also the least negative result since July 2022.

The new sales indicator was also less negative in February, improving from a net balance of -36% to -26%. However, the average time taken to complete sales continues to rise and is now approaching 19 weeks.

In an additional question included in the latest survey, RICS analysed the difference between asking and sales prices in the current climate. In the mainstream market (covering prices up to £500,000), around 60% of respondents suggested that prices were being agreed at below the asking price. For properties priced between £500,000 and £1 million, the share jumped to just over 70%.

Tarrant Parsons, senior economist at RICS, commented: “The housing market continues to adjust to the tighter lending climate, with stretched mortgage affordability still weighing heavily on activity.

"Given the ongoing weakness in demand, house prices remain on a downward trajectory, and are expected to see further falls through the first half of the year at least.

"Going forward, near-term expectations suggest market activity will remain generally subdued over the coming months, although the latest survey feedback shows tentative signs that the ongoing decline in buyer enquiries is now moderating.”

Tomer Aboody, director of MT Finance, said: "After some months of constant negativity surrounding the housing market with buyers either stalling or waiting for mortgage products to stabilise so that they are more confident they can afford them, we are finally seeing some positivity with a slowdown in the decline.

"As Swap rates stabilise, leading to lower fixed-rate mortgages, buyers are slowly returning and looking to secure their home now that they regard mortgages as being more affordable. With hopes of inflation being reduced this year as the Prime Minister pushes for a more stable and improved economy, confidence is creeping back into the market."

Jeremy Leaf, north London estate agent and former RICS residential chairman, added: "These historically-accurate RICS figures confirm that the housing market continued to slow and became more price-sensitive in February but showed a few signs of correction.

"Worries about the cost of living and availability of mortgages mean homes are taking longer to sell and keeping prices in check. However, recent falls in lending rates, inflation and increasing property choice is contributing to a readjustment in the previously severe imbalance between supply and demand which we expect to continue into the spring."