The June 2023 RICS UK Residential Survey has reported a renewed deterioration in sales market activity, following the recent escalation in interest rate expectations.
As borrowing costs increased, many of the survey’s indicators fell deeper into negative territory this month, albeit most metrics remain at least somewhat above the lows hit towards the end of last year.
With respect to new buyer enquiries, the national net balance slipped to -45% in June, down from a reading of -20% last month. As such, this marks an eight-month low for the buyer demand series. When disaggregated, respondents across all parts of the UK reported a firmly negative trend in buyer enquiries compared to May.
For newly agreed sales, the headline net balance fell to -34% this month, notably weaker than the figure of -8% posted last time around. In fact, June’s return represents the most downbeat figure since December last year, when the net balance stood at -38%. Looking ahead, near-term sales expectations deteriorated to post a net balance of -36% in June (a four-month low), down sharply relative to the reading of -9% seen previously. On a 12-month view, a net balance of -31% of survey participants foresee sales declining. This brings to an end a three-month run of largely stable sales expectations for the year ahead, and adds further evidence of the negative impact of rising interest rate expectations on market sentiment.
Looking at supply, having picked up slightly during May, new sales instructions reportedly held more or less steady this month (net balance -1% vs +14% previously). Meanwhile, average stock levels on estate agent’s books were also little changed relative to last month (coming in at 37.4 properties). Although this level of inventory is still slightly higher than that reported at the end of last year, the average number of homes available for purchase currently remains very low on a longer term historical comparison.
Turning to house prices, the national net balance fell to -46% in June, declining from a figure of -30% beforehand. Having turned slightly less negative in both April and May, the latest feedback on house prices signals downward impetus is gaining traction once more. When viewed at a more local level, all English regions are seeing house prices retreat, with East Anglia and the East Midlands exhibiting the sharpest monthly declines in net balance terms (-72% and -69% respectively). By way of contrast, house prices remain more resilient across Northern Ireland and Scotland, evidenced by respondents based in both countries continuing to cite an upward trend despite the weaker activity backdrop.
Going forward, national house price expectations are now firmly negative at both the three and 12-month time horizons. Regarding the latter, the latest net balance fell to -49% compared to -3% returned in the previous iteration of the survey (marking the weakest price outlook since December 2022). Again, prices are expected to fall across all parts of the UK in the year ahead, with the exception of Northern Ireland and Scotland.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “There’s no doubt the latest rise in interest rates hit the market like a missile, prompting a pause for thought at the very lease among buyers.
“However, we saw in our offices very few actual withdrawals from purchases, although we did notice some renegotiation of terms, usually including price, on nearly every sale.
“Listings are picking up but not as quickly as we expected, with interest on appropriately-priced properties continuing to be dominated by cash or equity-rich buyers.”
