Housing market stabilises in August as buyers return – RICS

The Royal Institution of Chartered Surveyors (RICS) UK Residential Market Survey found that despite this improvement, both indicators remained negative and were likely impacted by interest rate uncertainty. 

Surveyors gave a score of minus 19% for new buyer enquiries in August, the least negative reading since January and a continuation of improved activity over the year. 

The metric for agreed sales was given a reading of minus 17%. While subdued, it was the least negative score since February and significantly improved on the reading of minus 38% in April. 

Looking forward, surveyors gave readings of minus 3% for agreed sales over the next three months, a more positive score than the minus 13% given at the last survey. The RICS said this suggested that activity would be stable in the future. 

Respondents gave a reading of 6% for sales volumes over the next 12 months, pointing to an improvement. This was also more optimistic than the 3% reading in July. 

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Surveyors expect house prices to remain muted, giving a reading of minus 28%, similar to the score of minus 29% in July. However, the flat reading pointed to improved confidence compared to the minus 35% reading in April. House prices are still expected to fall over the next three months before stabilising over the year. 

The RICS identified regional differences, as the outlook for house prices in London was more negative than the national average. Meanwhile, rises were seen in Northern Ireland, while the North West of England maintained moderate growth. 

Property supply remained steady, with the flow of new listings broadly unchanged and the score of new instructions at zero, compared with minus 2% in July. 

Market appraisals softened, with surveyors returning a score of minus 17%, suggesting weaker activity than last year. 

Tarrant Parsons, head of market research and analysis at the RICS, said: “August’s results show a market that is gradually finding its footing, with key activity indicators having become progressively less negative over recent months. That said, any potential recovery remains fragile and faces two significant near-term tests. 

“The Bank of England’s increasingly hawkish tone, on the back of renewed volatility in global energy markets, is a reminder that the borrowing cost outlook could yet deteriorate further. And with the October Budget approaching, speculation over potential changes to property taxation is adding another source of caution for both buyers and sellers. As such, headwinds over the shorter term remain pronounced, even though recent market trends have appeared more stable.” 

Tenant demand pushes up rent 

In the lettings market, the supply and demand imbalance put upward pressure on rents, as the score for tenant demand was 18% while landlord instructions were negative at minus 14%.

More surveyors expected rents to rise in the next three months, returning a score of 44%, up from 33% in July. Respondents predicted this would continue to rise over the next 12 months, forecasting rental increases of around 3% on average. 

Jeremy Leaf, North London estate agent and a former RICS residential chair, said: “Continuing uncertainty in the sales market has resulted in more lettings activity, with tenants taking advantage of their new ability to end fixed-term constraints under the Renters’ Rights Act.

“Rents have held firm, supported by supply shortages, especially of larger flats and family houses, as exiting landlords are not being replaced fast enough, so standards are slipping too.” 

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Tenant demand is getting stronger at the same time new buyer enquiries are weak, and looking ahead, sales listings are not expected to materially change over the short term. 

“There will be some prospective buyers deciding it is a safer bet to continue in the private rental market for now, but with the RICS landlord instructions indicator remaining in negative territory, there is the obvious danger that tenant demand continues to outstrip supply, putting prolonged upward pressure on rents.”