Signs of Recovery in UK Housing Market
According to a recent survey of estate agents, UK house prices are experiencing a less severe decline as sales pessimism wanes, indicating a potential stabilisation in the property market following a surge in mortgage costs, a report from London-based Chartered Surveyors has revealed.
The Royal Institution of Chartered Surveyors (RICS) reported that their house price balance, which gauges the difference between the percentage of surveyors who observe price rises and falls, increased to minus 39 in April, the highest it has been in five months.
Looking ahead to the next twelve-months, RICS said the price expectations indicator continues to improve from the lows hit during the end of 2022, returning a net balance of -16% in April compared to the -24% recorded in March. While RICS noted that the market is “continuing to struggle, with high borrowing costs and an uncertain economic outlook remaining the main challenges for home buyers”, agreed sales improved to minus 19 in April, their highest level since July last year. However, the measure tracking new buyer demand fell to minus 37 from minus 30 in March and February.
The data echoes figures released last week from mortgage provider Nationwide, which showed house prices rose 0.5 per cent between March and April, and the Bank of England, which reported that mortgage approvals reached a five-month high in March.
Twelve-month sales expectations continue to depict an improved and steadier outlook for the market.
Following a peak in autumn last year, borrowing costs have since decreased, albeit remaining higher than pre-September 2022 levels. This decrease followed former prime minister Liz Truss' announcement of £45 billion in unfunded tax cuts in her ex-Chancellor Kwasi Kawarteng’s ill-fated mini Budget.
“Although the newsflow around housing does appear to have steadied over the past month, key indicators from the RICS survey point to a series of challenges in both the sales and lettings space,” noted Simon Rubinsohn, RICS Chief Economist. “Most notably, buyer demand still appears to be subdued in the face of relatively high borrowing costs, the prospect of at least one more interest rate hike and ongoing affordability challenges.”
“Meanwhile, the imbalance between demand and supply in the letting market still remains stark despite the significant increase in rents. Critical to addressing both areas of the market is the delivery of more supply. However, indicators of the level of new housing starts in the early part of the year suggests that the picture is if anything continuing to soften as housebuilders activity reflects both macro uncertainty and policy developments”. Albeit Rubinsohn comments are a stark warning of things to come, according to industry pundits, home owners who have fixed-rate deals, however, are benefitting from the easing of longer-term interest rate expectations.
As a result of many people being unable to purchase a property, surveyors have reported higher rental demand, with rental prices rising significantly above average levels over the last two decades. The Office for National Statistics released data showing that housing affordability continues to be a problem for young people, with more opting to stay living with their parents, particularly in London.
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