The Royal Institution of Chartered Surveyors (RICS) has reported a market continuing to struggle, with high borrowing costs and an uncertain economic outlook remaining the main challenges for home buyers.
Starting with new buyer demand, in terms of net balance, the figure for April dropped to -37% from the -30% recorded in March (captured on a seasonally adjusted basis).
However, most of April’s Residential Market Survey’s indicators have improved slightly from the lows hit towards the end of 2022.
The indicator capturing agreed sales for April returned a net balance of -19% up slightly from -30% last month. This represents the least negative reading since July 2022.
In terms of supply, survey respondents cited an overall flat picture for new instructions during April, with the net balance declining slightly to -4% (from -6% in March).
The recent decrease in demand and sales has resulted in a slight increase in the average number of properties held on estate agents’ books (36 homes on average for each agent, compared to 35 in February and March).
Anecdotal commentary from survey respondents provided insight into recent buying trends with several respondents citing buyers looking for smaller, more affordable homes while people are moving out of older homes to buy more energy efficient new builds.
The latest feedback from the survey in relation to house prices remains in negative territory with a net balance of -39% in April, although this current reading is less negative compared to net balances of -43% and -47% seen in March and February.
Looking ahead to the next 12 months, 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.
Moving across to survey results from the rental market, tenant demand has increased in the three months to April according to a net balance of +41%
However, a fall in landlord instructions was recorded over the same timeframe, with a net balance of –24%% of respondents reporting a decline. With demand continuing to outstrip supply, rental prices are anticipated to be driven higher over the next few months.
Simon Rubinsohn, RICS chief economist, said: “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.
“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.”