December 15, 2023 1:02 pm

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Nikka Sulton

The latest RICS Residential Survey, released today, presents a cautiously improved outlook for the housing market. This shift in sentiment is underpinned by a slight easing in mortgage rates observed in recent weeks. The market seems to be responding positively to this adjustment, hinting at potential improvements in the near future.

However, it’s crucial to note that the optimism is tempered by the fact that short-term sales are only showing marginal positivity. While the easing of mortgage rates is a positive factor, other key indicators still linger in negative territory. This suggests that while there might be some positive shifts, challenges and uncertainties persist in the housing market.

The RICS market snapshot, determined through a sentiment survey of its members, expresses market conditions in terms of ‘plus’ or ‘minus.’ This nuanced approach indicates that the housing market is in a state of delicate balance, with improvements in some areas but persistent challenges that warrant continued observation.

At the UK level, the net balance reading for new buyer enquiries came in at minus 14 per cent in November. While this signals buyer demand is still falling, it is the least negative figure since April 2022. The gradual improvement could be attributed to a small easing in mortgage rates over recent weeks, providing some optimism for the housing market. However, the overall outlook remains cautious, as evidenced by the marginal positivity in near-term sales and the presence of other indicators in negative territory.

When viewed at a regional level, feedback on new buyer enquiries is mixed. Positive readings are observed in both the North West and Northern Ireland, indicating pockets of resilience in these areas. In contrast, London’s new buyer enquiries have turned less negative (minus 12 from minus 31), suggesting a potential stabilization in demand. Other regions, such as Wales (minus nine from minus 57), are also showing signs of improvement, although some areas like Yorkshire and Humber and the North have experienced further declines.

For agreed sales, the latest national net balance of minus 11 per cent compares with a reading of minus 23 per cent in October, suggesting a potential easing in the downward trend of sales volumes. This improvement is more pronounced in specific regions, with East Anglia, the North West, and Northern Ireland all reporting positive figures. While challenges persist in the broader market, these regional variations highlight the nuanced dynamics at play in the UK housing sector.

Looking ahead, near-term sales expectations for the next three months have shown improvement, registering the first positive reading since early 2022 at plus six. Looking further into the future, the twelve-month sales expectations are notably positive, with a net balance of plus 24 per cent of respondents anticipating an improvement in sales activity. This marks the most optimistic outlook for this forward-looking measure since January 2022.

House price sentiment has also shifted towards the positive, albeit still in negative territory, with a net balance of minus 43 per cent in November. While this signifies an expectation of a decline in house prices, the sentiment has improved over the past three months, indicating a less negative outlook.

In the lettings market, tenant demand continues to rise, as indicated by plus 20 per cent of respondents. However, this marks the most modest reading since January 2022. Despite the demand, the challenge lies in the supply, with landlord instructions continuing to decline.

Looking forward, although twelve-month expectations for rents have slightly eased in recent times, rents are still projected to rise by close to four per cent at the headline level over the next year. The rental market dynamics highlight the ongoing tension between rising demand and diminishing supply, contributing to the overall landscape of the property market.

Simon Rubinsohn, RICS Chief Economist, notes that the recent RICS Residential Market Survey indicates a slightly less negative sentiment, particularly with the new buyers enquiries indicator showing signs of stabilization. This improvement is attributed to growing confidence that the interest rate cycle has reached its peak, resulting in more competitive mortgage products entering the market.

However, Rubinsohn emphasizes that despite this positive development, the cost of money is expected to stay elevated for an extended period, and the economic outlook remains subdued. Consequently, the overall sentiment conveyed by survey respondents in their anecdotal remarks remains cautious, reflecting the ongoing challenges and uncertainties in the property market.

 

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