‘Mood music’ in sales market has shifted, says RICS

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The UK residential property sector brightened slightly in July, according to the latest RICS UK survey.

Moreover, the group said the new government’s focus on promoting housing development and the recent 0.25 percentage point cut in the base interest rate appear to have changed the mood in the home sales market.

Average mortgage rates fell slightly during the month as the market correctly anticipated a rate cut from the Bank of England.

This has led to improved strength in the housing sector, although the full impact of the central bank’s interest rate cuts and the UK government’s housing reform announcements will not become clear until next month’s report.

More buyers are looking to purchase a home in July, with new buyer inquiries up slightly, increasing from -6% in the previous month to +2%. While still roughly stable, this is the first time in four months that there has been a positive number of buyers looking to enter the market.

Contract sales numbers also improved. While -2% (net balance) for the month is still in negative territory, it represents a clear improvement and continues the positive trajectory since scores of -13% and -6% in May and June, respectively.

Looking at sales figures for the next three months, over 30% of respondents to the RICS survey expect sales to increase over the next three months, the most positive outlook since January 2020.

The longer term (12 month) outlook is also brighter, with +45% (net balance) of respondents expecting revenue to increase within 12 months, up from +40% (net balance).

Looking at house prices, the figures show they are still falling across the UK, with the overall figure combining data from all UK regions coming in at -19% (net price).

Sentiment towards prices was negative in all regions of England, with East Anglia and Yorkshire and the Humber showing the weakest figures, but prices rose in Scotland and Northern Ireland.

Looking ahead, 46% of respondents (net) expect prices to increase within the next year.

rental

The rental market continues to see a widening gap between supply and demand. Demand continues to grow slowly, with a net balance of +18% reported this month, while landlord instruction sentiment was at a net balance of -16%. While the gap growth rate has slightly decreased, the continued movement indicates that rental prices are likely to rise further in the near future.

Outlook

Simon Rubinson, chief economist at RICS, said: “The new government’s focus on encouraging housing development and the recent 0.25 percentage point base rate cut appears to have changed the mood in the house sales market, with the latest RICS Housing Market Survey showing an upturn in both the short and medium term forecasts for house sales activity.”

“Despite the inevitable significant challenges ahead in delivering on the ambitions of the planned reforms and it being unclear whether the Bank of England will follow up its August steps with further easing in the coming months, the policy mix is ​​nevertheless looking more supportive for the financial sector.”

“However, while there may be a little more hope for the sales market, the rental market remains challenging with little relief in sight. Demand continues to outstrip supply and many respondents to the RICS survey indicated that landlords are considering reducing their holdings as the investment environment in the property industry becomes increasingly challenging.”