RICS has reported that the UK housing market continues to weaken, with last month bringing another decrease in buyer demand and agreed sales, alongside a halt in house price growth.
The October 2022 RICS Residential Market Survey revealed that new buyer enquiries fell for a sixth successive month in the sales market, as the latest headline net balance weakened further to -55% in October (from -36% last time). Moreover, the survey feedback on buyer demand is negative across all parts of the UK, the second report running where this has been the case.
In keeping with the general pattern of a weakening market, the average time to complete a sale from its initial listing has edged upwards, now taking close to 18 weeks. At this point last year, the average completion time was closer to 16 weeks.
Concerning house prices, the latest results show a considerable slowing in momentum. The national net balance for house prices moderated to -2% in October, down from a figure of +30% previously. As such, this ends a sequence of 28 positive monthly readings, with the latest result indicating house price growth grinding to a halt. There are regional differences in house prices, with respondents in areas such as East Anglia and the South East of England reporting some pull-back in prices (posting net balances of -31% and -16% respectively). Conversely, respondents based in Northern Ireland and Scotland continue to report that a reasonably firm upward trend in house prices is remaining in place, even if the pace of growth is softer than earlier in the year.
Looking ahead, the net balance for the 12-month price expectations series sank to -42% in the latest findings, falling from a reading of -18% last time. When viewed at the regional/country level, respondents across all parts of the UK are now (on balance) of the opinion that prices will see some degree of decline over the year ahead.
In the lettings market, tenant demand continues to rise at a solid pace, with a net balance of +46% of survey participants noting an increase in October (part of the seasonally adjusted quarterly lettings dataset). At the same time, landlord instructions fell once again according to a net balance of -14% of respondents at the headline level. RICS said that given this mismatch, rents are expected to be driven higher over the near-term, returning a net balance reading of +52. At the 12-month time horizon, respondents envisage rents picking up by around 4% nationally.
Simon Rubinsohn, RICS’ chief economist, said: “The latest feedback to the RICS survey provides further evidence of buyer caution in the face of the sharp rise in mortgage costs. As a result, the volume of activity is likely to slip back over the coming months and realistic pricing is now much more important to complete a sale.
“The settling down in financial markets could provide some relief although it may be premature to assume this will be reflected in a reduction in lending rates anytime soon. However, the employment picture remains critical to the medium-term outlook and for the time being, that remains solid.
“As far as the lettings market is concerned, the imbalance between demand and supply still appears unusually extended leading to rent expectations in the survey remaining at elevated levels and it is difficult to see this changing anytime soon in the current environment.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, added: “Never was the saying – confidence takes a long time to build but can disappear almost immediately – so true for the property market.
“The mini-Budget frightened the life out of nearly all our buyers who are dependent on mortgages. Many have slowly emerged from hiding as rates stabilised and slowly began to fall.
“New buyer numbers have certainly dropped but we’re seeing no signs of a price collapse. On the other hand, some tough negotiations are underway between more realistic buyers and sellers with most existing sales hanging together – but some by a thread.”
