RICS has published its UK Residential Survey for July 2023 and the trade association says its results are symptomatic of a market losing further ground in the face of higher mortgage rates.
Indicators tracking activity continue to exhibit firmly negative readings, while widespread falls in house prices are being reported. Moreover, respondents foresee this picture remaining in place over the near-term, with sales expectations turning a little more pessimistic during the latest survey period.
At the national level, the new buyer enquiries series posted a net balance of -45% in July, similar to last month’s figure of -46%. As a result, this metric continues to signal a sharp downturn in buyer demand following the latest escalation in mortgage interest rates. When viewed at a regional/country level, all parts of the UK display a firmly negative return for new buyer enquiries over the month.
In keeping with the deteriorating demand backdrop of late, a net balance of -44% of respondents noted a decline in agreed sales during July. This is down from a figure of -36% previously, and represents the weakest reading for the sales measure since the early stages of the pandemic. Again, the disaggregated data shows sales volumes falling right across the UK. Looking ahead, near-term sales expectations have turned increasingly subdued of late, posting a net balance of -45% in July (substantially weaker than respective net balances of -38% and -11% in June and May). Furthermore, on a 12-month view, a net balance of -25% of survey participants envisage sales volumes declining (albeit this is marginally less downcast than a reading of -31% last time).
Looking at trends in fresh listings coming onto the sales market, the headline new instructions net balance slipped to -13% in July (compared to -3% in June), indicative of a renewed deterioration in the flow of supply. Alongside this, contributors continue to report the number of market appraisals undertaken over the month to be below that seen in the comparable period last year (net balance -37%). At the same time, inventory levels on estate agents books have held broadly steady over the past few months, averaging close to 38 properties. Although this is higher than the lows seen towards the end of last year, supply levels remain very tight on a longer term historical comparison.
Terry Woodley, managing director of development finance at Shawbrook, said: “Buyer confidence continues to be stifled by interest rate rises and challenging economic headwinds.
“As demand becomes subdued, developers are adapting their business models. Our research indicates that 39% of developers are diversifying their strategies and focussing on different types of schemes which may include the likes of build-to-rent and houses in multiple occupation (HMOs) to adapt to the lessening demand from buyers.
“The most resilient investors will seek new opportunities to capitalise on and its crucial they work with a funding partner who can adapt with them.”
