Sales momentum remains weak amid wider housing market recovery: RICS

The results of the April RICS UK Residential Survey show a market "struggling for momentum", with higher borrowing costs and a cautious economic outlook still the main challenges. 

Despite this, most the of survey’s indicators have edged up at least somewhat from the lows hit towards the end of last year, while twelve-month expectations continue to signal a more stable backdrop coming through further ahead.

Starting with new buyer demand, the headline net balance came in at -37% in April, down from a reading of -30% in each of the last two reports when captured on a seasonally adjusted basis. Even so, the latest return, while being consistent with a renewed drop in buyer enquiries, is not quite as downbeat as the figure of -43% posted back in January. Nearly all parts of the UK recorded either a negative or flat trend in home buyer demand, with the exception of Northern Ireland, where a marginal rise was reported.

Alongside this, the agreed sales indicator returned a net balance of -19% in April, up modestly from a figure of -30% last month. In fact, this represents the least negative reading since July 2022, albeit the latest result remains subdued on a longer term historical comparison. Going forward, near-term sales expectations are still in negative territory, but have turned progressively less downcast in each of the last four months (moving from a net balance of -52% in December 2022 to stand at -20% this time around). Furthermore, on a twelve month view, expectations are pointing to a largely stable trend in sales activity emerging, registering a net balance reading of +3% (little changed from +1% last month).

Although most sales market metrics have turned somewhat less negative over the past couple of months, the average sales time from listing to completion has continued to lengthen. Respondents report that sales are now taking close to 20 weeks to finalise at the national level, up from nearer to 17 weeks this time last year. 

With respect to supply, respondents cited a generally flat picture for new instructions coming onto the market during April. Given the drop-off in demand and sales of late, this has resulted in a slight increase in the average number of properties on estate agents books, although the current level remains very close to historic lows nonetheless. Meanwhile, a net balance of -36% of contributors continue to report that the number of market appraisals undertaken over the month is running below the equivalent period of last year. As such, this suggests supply conditions are set to remain tight in the immediate future.

The latest feedback on house prices remains in negative territory at the headline level, posting a net balance of -39% in April. That said, the current reading for this indicator is marginally less negative compared to net balances of -43% and -47% seen in March and February respectively. Disaggregating the data shows some interesting variations at a regional level. While price declines in London seemingly slowed (net balance -9% compared to -45% in March), the latest net balances sunk deeper into negative territory across the South East (-62%) and East Anglia (-77%). 

Going forward, near-term house price expectations are signalling further falls over the next few months across the UK in aggregate, posting a net balance of -48% vs -47% previously. However, the twelve-month expectations series continues to move up from the lows hit during the end of last year, returning a net balance of -16% in April compared to -24% last time (and up from -61% in November 2022). 

Jeremy Leaf, north London estate agent and former RICS residential chairman, said: “Unfortunately, not even the arrival of better weather and the prospect of lower mortgage rates could shake the traditionally busier spring housing market out of its lethargy. Too many available flats has meant only demand for houses has held up well in recent weeks – and more than we dared to expect. There’s no doubt the end of the stamp duty holiday in March brought forward many moving decisions. As a result, prices are softening as most buyers and sellers are not withdrawing but preferring to find middle ground if possible despite continuing worries about economic prospects and pace of interest rate falls."

Emma Cox, MD of real estate at Shawbrook, commented: “Despite recent reductions to mortgage rates in the market, April’s fall in buying activity will largely be attributed to the removal of stamp duty relief for first-time buyers. 

“As a result, rental demand - which has been high for some time now - continues to increase, outpacing the supply of quality stock and putting further strain on the housing market. Professional landlords have a key role to play in providing suitable, efficient properties to cater for the growing rental population, and many will be turning to different property types such as houses in multiple occupation (HMOs) and semi-commercial properties to maximise yields and remain profitable in the face of any market challenges.”