Surveyors are predicting property prices will bounce back over both the short and longer term, according to the latest monthly residential housing survey from the Royal Institute of Chartered Surveyors (Rics).
The March survey shows sentiment is steadily improving, on the back of improved market conditions, with new property listings increasing for a fourth month and buying demand also rising. Meanwhile respondents note that house prices had stabilised, after falls last year.
According to the data, buyer demand continued to rise in March with a net balance of +8% of respondents citing an increase in new buyer enquiries during March. This is the most positive result on this indicator since February 2022.
On the property supply front, the flow of new listings coming to the market continued, with a net balance of +13% of respondents noticing a pick-up in new instructions in March.
Looking at future expectations, respondents are optimistic about a further improvement in activity over the coming months, with a net balance of +13% of respondents predicting sales volumes rising in the next three months, compared to a reading of +6% previously.
There was also an increase in respondents with a more positive longer term outlook, with a net balance of +46% of respondents predicting sales activity rising over the next 12 months, up from +42% in February.
Rics pointed out that this is the seventh consecutive month that the outlook for property prices has grown less negative, rising from a net balance of -67% in September 2023 to -4% in March. It says this suggests a stable picture is now in place for house prices across the UK.
Moving across to the lettings market, the question relating to tenant demand remained modestly positive in March, at a net balance of +19 (+16 last time round). On the opposite side of this equation, landlord instructions once again show a weak net balance reading of -19. Consequently, +34% of survey respondents still expect rental prices to rise in the next three months.
Rics senior economist Tarrant Parsons says: “Demand continues to recover gradually across the UK housing market, with new buyer enquiries rising for a third month in succession according to the latest survey feedback.
“With the inflation backdrop turning a little less difficult of late, this has led to expectations that the Bank of England will be able to start lowering interest rates later in the year. This should continue to support the market to a certain degree going forward.
“In keeping with this, near-term sales expectations point to an improving outlook, albeit the scope for an acceleration in activity will still be relatively limited given mortgage rates are set to remain much higher than in 2020/21”.
Rics also welcomed last week’s government announcement that the Levelling Up, Housing and Communities Committee would launch of an inquiry into the home buying and selling process, which will look at if the current processes are fit for purpose and what can be done to make improvements.
Rics senior public affairs officer Sam Rees says: “As the activity in the housing market increases, we welcome the inquiry into how the home buying process can be improved for consumers.
“As a founding member of the Digital Property Market Steering Group, we are already working across the sector to identify ways that consumers and industry professionals can have access to the necessary information needed to buy and sell a home, reducing fall throughs and transaction times.”
Former Rics residential chairman and London estate agent Jeremy Leaf says these figures were encouraging: “Buyers and sellers are emerging from an extended hibernation, which resulted in a subdued market for much of last year. Better weather is coinciding with much more interest than we have seen for several months.”
However he points out that there are still affordability issues in the residential market. “The increased choice of properties is making it more difficult for buyers to make up their minds as they worry about missing out on an alternative.
“As a result, decision-making is more protracted and bargaining is harder so sales are taking longer. Prices are firming up but concerns about affordability are keeping a lid on sellers who think that more viewings will lead to much higher values.”
He adds: “On the lettings side, affordability constraints are certainly playing their part with the pressure for higher rents building as supply is still not keeping up with demand. However, the quality of interest remains low, resulting in considerable additional checks to ensure tenants can pay their way for the length of the tenancy at least.
“Gently rising rents are the likely outcome and certainly the sharp increases seen last year are probably a thing of the past for the next few months at least.”
MT Finance director Tomer Aboody adds: “With more stock coming to the market as confidence increases, we are seeing further buyer demand, taking advantage of consistent interest rates and lower inflation.
“With expectations of a reduction in interest rate growing all the time and more stock expected to be launched this spring, this positive sentiment is likely to continue, even as a general election looms on the horizon.”
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