The Royal Institution of Chartered Surveyors (RICS) UK Residential Market Survey showed that surveyors’ opinion of buyer demand had moved out of negative territory, with a reading of 3% for new enquiries.
This was significantly better than the reading of negative 22% in May, but RICS said this was mostly a sign of the market stabilising rather than recovering.
In June, the score for agreed sales improved, with surveyors marking it at negative 3%, which was a notable improvement from the previous readings of minus 25% and minus 28%.
It said there were indications that the recent decline was subsiding, but surveyor feedback did not point to a return to growth in sales activity.
Although there was an improvement, RICS said the momentum for sales was expected to be subdued in the near term. Surveyors gave a score of 6% for house sales in the next three months, up from minus 2% the month before, suggesting a “gentle recovery” ahead.
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However, regarding the 12-month view, surveyors gave a reading of 5%, down from 25% previously, indicating a flattening in sales activity over the next year.
Flow of new housing supply still steady
The RICS report found that the reading for new instructions activity was 3% in June, down from 7% the month before. This was also the least positive score for new housing supply in the last 12 months, suggesting that the sustained rise in new listings coming to market was “losing a bit of steam”.
Despite this, a 16% score for the number of market appraisals conducted in June was up on last year, hinting at an improvement in the supply pipeline in the future.
Regarding house prices, a reading of 7% was given in June, unchanged from the May report.
This showed a flat to marginally negative trend in house prices at an aggregate level, but there were differences across regions.
Surveyors in the South East, East Anglia and London reported sharper declines in house prices than the national averages.
By contrast, there were increases reported by respondents in Northern Ireland, the North West of England, Scotland and the East Midlands.
The near-term expectation for house prices was for them to remain in a marginally negative territory over the next three months, but when asked to give a 12-month outlook, surveyors gave a score of 24%, pointing to rising house prices in the future.
Rental demand flat
Tenant demand for rental housing was flat in June, with a score of 2%.
Landlord instructions continued to decline, with surveyors giving a reading of negative 21%. However, 21% of respondents said rents would rise over the next three months, but this was a weaker reading than the 43% given in May.
Jeremy Leaf, North London estate agent and a former RICS residential chair, said: “Nervousness about the cost of living again and seemingly inevitable autumn tax rises are contributing to present tenant affordability concerns.
“On the ground, we are finding there’s still interest, particularly in smaller one- and two-bedroom flats. Rents are being supported by a continuing lack of stock due to landlords selling up and not being replaced in anything like sufficient numbers by new or existing investors.”
A settled phase for the housing market
Tarrant Parsons, head of market research and analysis at RICS, said: “The UK residential market appears to be entering a more settled phase, with demand showing signs of stabilising following a period of volatility. The earlier distortion caused by transactions being brought forward ahead of the stamp duty changes now appears to have largely dissipated, allowing underlying trends to re-emerge.
“Encouragingly, near-term sales expectations have begun to edge higher, pointing to a modest shift in sentiment. That said, confidence in the market remains somewhat delicate, with economic uncertainty at both the domestic and global level still seen as a potential headwind.”
Emma Cox, managing director of real estate at Shawbrook, said: “As market conditions begin to settle and rising house prices have started to plateau, we’re seeing a welcome return to growth in buyer demand, which has perked up to positive figures for the first time since December last year.
“It’s clear that a quiet confidence is returning, and buyers have adjusted to a new landscape now that the stamp duty exemption removal is firmly in the rear-view mirror. As buyers compete to secure deals, further pressure is also being placed on the rental market – which still has a shortage of stock. While landlord instructions have fallen, for professional landlords, this has opened up compelling opportunities for those looking to expand their portfolios, and cater for demand by providing quality, energy-efficient properties.”
Tomer Aboody, director of specialist lender MT Finance, said: “Activity in the market continues to strengthen as buyers return after the lull following the end of the stamp duty holiday. First-time purchaser numbers in particular are picking up as interest rates remain steady and lenders more flexible when it comes to mortgage approvals.
“However, sales numbers still need to improve as this will benefit the wider economy, not just the housing market. Some encouragement is required via a reform in stamp duty to encourage those moving up the ladder, as well as those downsizing, to take the plunge.”
