Housing market weakens further as buyer activity continues to fall: RICS

The housing market saw a further weakening at the end of 2022, with metrics tracking property sales, instructions, and price trends demonstrating further declines, the latest RICS survey shows.

Additionally, the survey results suggest that the housing market will remain on this downward trend over the coming months.

At a national level, the net balance reading for new buyer enquiries came in at -39% (down marginally on a figure of -38% beforehand), signalling an ongoing weakness in new buyer demand across the UK.

Alongside this, the number of fresh property listings coming onto the sales market also fell, with the latest net balance of -23% representing the weakest return for this indicator since September 2021.

Agreed sales across the country reported a net balance of -41% among survey participants, indicating a further decline during December. This reading is down from -36% reported in November. This downward sales trend became clearer across virtually all parts of the UK over the month, with respondents in the North West of England, Scotland, Wales and London all citing a particularly quiet month for activity in our latest results.

Turning to house prices, a national net balance of -42% of respondents reported a decline in prices over the latest survey period. This represents a further weakening relative to the figure of -26% posted in the November survey and indicates the downward price trend gaining further traction.

When separated, all regions across England are now seeing prices soften to some degree, with feedback pointing to East Anglia and the South East seeing the sharpest rate of decline in net balance terms.

However, respondents across the UK envisage some pull-back in prices in the three-months ahead.

The December survey included a set of additional questions looking at the impact of energy efficiency ratings on buyer behaviour.

When asked if respondents are seeing greater interest from buyers in homes that are more energy efficient, around 40% of the survey sample answered yes, although this was outweighed by 60% who said they do not see this trend.

Meanwhile, 41% of respondents noted that sellers were attempting to attach a price premium on homes with a high energy efficiency rating.

By the same token, 61% of contributors stated that highly energy efficient homes were holding their value in the current market.

Simon Rubinsohn, chief economist at RICS, commented: “The latest RICS Residential Survey highlights the emerging challenges in the housing market as new buyers grapple with more costly finance terms and uncertainty over the outlook for the economy.

“This is reflected in forward looking RICS indicators around both prices and activity. However, some signs of an easing in inflation pressures more generally could provide a chink a light particularly for those looking to take their first step on the property ladder."

Tomer Aboody, director of MT Finance, added: "The ongoing impact of cost-of-living increases, along with mortgage rates, has led to a weakening in sales in the property market, as expected.

"With buyers and homeowners waiting to see what the next few months hold, it's not surprising that lower transaction levels are being seen. Fewer people are prepared to take the plunge and make a commitment as significant as buying a house at this time.

"With some possible optimism coming from a couple of months lower inflation, along with government plans to reduce it by half, there could be light at the end of the tunnel. As the impact of this filters through, it could well bring some much-needed confidence back to buyers and sellers alike."