House Sales On The Rise As An Air Of Cautious Optimism Sweeps Over UK Housing Market

House sales continue to tick upward as market confidence improves, according to the latest RICS residential survey, released this morning revealing a more positive trend in buyer enquiries and new listings.

New buyer enquiries stayed positive for the second successive month (+6% net balance) showing a continued upwards trend in buyer demand, despite the the recent easing in mortgage rates likely to stall, that trend is set to continue. Looking at regions across the UK, most have now shown a recovery in buyer interest over the last two months.

Agreed sales were flat in February (-3% net balance) and although this is less positive than in January it still signals a stronger trend in sales than was evident in most of the last 12 months (average net balance of -22%).

Looking ahead, the sales expectations for the near term are positive, and sales activity is expected to gain further momentum over the coming year (net balance +42%). In addition, respondents across all UK regions/countries foresee residential sales activity picking up over the longer-term time horizon.

Interestingly, one of the more noteworthy developments to come through in the February survey was a solid rise being reported in new instructions to sell. The latest net balance of +21% represents the strongest reading since October 2020, in contrast to the continuously negative picture cited throughout 2023. Average stock levels on estate agents books now sit at 42 properties, the highest since February 2021, with respondents noting an increase in market appraisals over the month relative to the same period last year.

House prices still point to a downward trend across the UK as a whole, but this is stabilising with the February figure the least negative since October 2022. In London, the turnaround in the price indicator is slightly more pronounced. Looking ahead, a net balance of +36% of respondents across England and Wales now envisage house prices returning to growth at the twelve-month time horizon.

In the lettings market, tenant demand continues to rise but at a rather more modest pace than previously. At the same time, however, landlord instructions are still dwindling, meaning respondents envisage rents moving higher over the coming months albeit at a slower rate.

Simon Rubinsohn, chief economist, RICS, commented: “The February RICS survey provides some grounds for encouragement around the sales market with not just buyer interest staying positive for the second successive month but also the uplift in new instructions to agents. Whether the increase in stock coming back to the market will be sustained is likely to be a critical factor in explaining how things play out over the balance of the year especially with new build likely to remain constrained.

“Significantly, the rise in the number of appraisals taking place points in the right direction. And the government will be hoping that this trend is given a boost by the change to CGT announced in the Budget.

“Meanwhile, there are signs that the relentless upward trend in private rents is losing momentum but fresh demand is still comfortably outstripping supply in this area which suggests there is unlikely to any significant relief for tenants. Indeed, feedback from respondents to the survey continue to highlight the challenges in the sector resulting from a whole host of measures introduced in recent years.”

Reacting to the RICS’ UK Residential Survey, for February 2024, Tom Bill, head of UK residential research at Knight Frank, said: “The economic data has fluctuated since Christmas but the direction of travel for the housing market is up as mortgage rates ultimately head in the opposite direction. Ironically, recent weakness in the jobs market is a positive sign for buyers and sellers as pressure on the Bank grows to cut rates sooner rather than later, leading to more mortgages starting with a 3. For anyone in the property market trying to time their decision, they would be well-advised to follow employment trends closely this year.”

As far as the lettings is concerned, Bill added: “The chancellor cut capital gains tax on residential property in an attempt to free up houses by encouraging more landlords to sell, and some may do just that after a series of financial disincentives in recent years. However, politics once again trumped economics in the housing market as fewer rental properties means more upwards pressure on rents.”

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