The latest RICS UK Residential Property Survey found the UK's residential property sector brightened slightly in July.
Average mortgage rates lowered slightly during the month as the market correctly anticipated a rate cut by the Bank of England. This has improved positivity in the sector, but the full impact of the Central Bank cut and the UK Government's announcements on housing reform will not be evident until next month's report.
New buyer enquiries picked up a little in July, with more buyers looking to buy a home - a result of +2%, up from -6% last month. Whilst still broadly flat, also it is the first time in four months that we’ve seen positive numbers of buyers looking to enter the market.
The number of agreed sales also saw an improvement. Whilst this month's -2% (net balance) result is still inside negative territory, it's a clear improvement and continues the positive trajectory since it scored -13% and -6% in May and June, respectively. Looking at the sales numbers over the next three months a net balance of +30% of respondents predicts sales rising over the next three months, which is the most positive sentiment since January 2020. The long-term (12 months) is also more optimistic, with +45% (net balance) of respondents expecting sales increases in twelve months, up from +40% (net balance).
Looking to house prices, the figures suggest these were still decreasing at the UK-wide level. The overall figure, which captures and combines all UK regional data, reported a -19% (net balance) result. All English regions exhibited negative sentiment towards prices, with East Anglia and Yorkshire & the Humber exhibiting the weakest readings. However, Scotland and Northern Ireland saw prices rising.
Looking ahead, +46% (net balance) of respondents expect prices to be higher in a year's time.
In the rental market, the gap between demand and supply continued to widen. Demand continued to rise modestly, with a +18% net balance figure reported this month, while sentiment towards landlord instructions stood at -16% net balance. Whilst the growth rate of the gap reduced a touch, the continued movement indicates likely further rental price rises for the foreseeable future.
RICS Chief Economist, Simon Rubinsohn, said: “The new government’s focus on boosting housing development alongside the recent quarter point base rate cut does appear to have shifted the mood music in the sales market, with projections for both near and medium activity picking up according to the latest RICS Residential Market Survey. Inevitably, significant challenges lie ahead in delivering on the ambitions around planning reform and it is far from clear that the Bank of England will follow the August move with further easing over the coming months, but, even so, the policy mix is becoming more supportive for the sector.
“However, if there is a bit more hope regarding the sales market, the difficulties in the lettings market remain as intense as ever with little prospect of any relief in sight. Demand is continuing to run ahead of supply with many respondents to the RICS survey noting that landlords are looking to reduce holdings in the face of an increasingly hostile environment for investment in the sector."
