The UK housing market remained subdued in July, with buyer demand and agreed sales showing little sign of a meaningful recovery, according to the latest Royal Institution of Chartered Surveyors (RICS) UK Residential Market Survey.
New buyer enquiries recorded a net balance of -28% in July, unchanged from June. Although still firmly negative, this has improved from the recent low of -41% recorded in March, suggesting the pace of deterioration in demand has eased.
Meanwhile, agreed sales registered a net balance of -30%, also unchanged from the previous month and somewhat less negative than the -37% recorded in April.
There are signs that sentiment towards the future is becoming less downbeat. Near-term sales expectations improved for the fourth successive survey to a net balance of -14%, whilst expectations over the longer twelve-month period moved to +3%, the most positive reading since February.
The flow of properties coming onto the market stabilised in July. New vendor instructions recorded a net balance of -4%, compared with -23% in June. Market appraisals, measuring activity against the same period last year, returned a balance of +19%. Nevertheless, the results suggest the pipeline of new listings remains relatively constrained.
The national house price balance came in at -30%, marginally improving from -32% in June and the recent low of -35% in April. The reading continues to indicate that price falls are more widespread than rises across the market.
Regional differences remain significant. London, the South East and South West continue to report more negative price balances than the national average, whilst respondents in Northern Ireland continue to report rising prices. After a sustained period of stronger growth, price momentum in Scotland also appears to be flattening.
Expectations for prices over the coming three months remain weak, with a net balance of -31%. However, respondents are slightly more positive over a twelve-month horizon, with the balance standing at +4%.
London stands out as an area lacking confidence, with year-ahead price expectations deteriorating to -23% in July, from -10% previously.
Conditions in the rental market continue to be shaped by constrained landlord supply.
Tenant demand was broadly flat in the three months to July, with a net balance of -1%, down from +12% previously. However, landlord instructions remained firmly negative at -27%, with survey feedback continuing to indicate that some landlords are reducing their portfolios or leaving the sector altogether.
Despite softer demand, expectations for rents remain firmly positive. A net balance of +28% of respondents expect rents to rise over the next three months, compared with +25% previously.
RICS member comments from across the country repeatedly point to a shortage of good-quality rental stock, alongside concerns that taxation, regulation and affordability are influencing landlord and tenant behaviour.
In the North, Tony Dobbins MRICS, of Anthony Jones Properties in Darlington, described buyers as “committed yet unhurried and increasingly price-sensitive”, with realistically priced properties continuing to sell while more ambitious asking prices stall.
In the East Midlands, Kirsty Keeton MRICS, of Richard Watkinson & Partners in Newark, reported a surprisingly busy July and suggested there may have been a slight improvement in confidence, although buyers remain under financial pressure.
In London, Jeremy Leaf FRICS said activity had picked up slightly but that high stock levels, geopolitical uncertainty and its potential implications for mortgage rates and inflation were continuing to constrain prices.
And in the South West, Howard Davis of Howard Estate Agent in Bristol said asking prices were continuing to be reduced to secure sales, describing conditions as “very much a buyer’s market”.
RICS Chief Economist, Simon Rubinsohn, said: “The housing market remains subdued, and while that is not usual over the summer months, it is clear from the RICS seasonally adjusted data, that the combination of geopolitics, the domestic political climate and the cost of mortgage finance are continuing to weigh on sentiment.
“Significantly, the forward-looking metrics also remain downbeat, which is not the sort of climate likely to encourage housebuilders to step on the gas on existing sites or in land-buying, as highlighted in recent trading statements from developers. Meanwhile, feedback from respondents to the RICS survey is continuing to draw attention to the impact of latest round of regulation on the rental market with the key indicator of new instructions pointing to a further drop in supply.”
