According to its latest residential market survey, the Royal Institution of Chartered Surveyors (RICS) found that new buyer enquiries had returned to positive growth, with net balance of plus 10 per cent of those surveyed saying they had improved. It is the first rise in buyer demand since June of this year.
However, this has not been mirrored in sales growth, with a net balance of negative nine per cent of respondents reporting a fall in agreed sales in October. This is the fourth consecutive month of negative reporting.
New instructions have also remained negative, with net balance of negative 20 per cent stating there were fewer instructions. This is the seventh month of negative new instructions.
It added that average stock levels at estate agents stood at 37, down from 42 in March this year.
The report said the lack of supply was impacting sales momentum and was also fueling house price growth.
A net balance of plus 70 per cent of respondents reported an increase in house prices, which is in line with figures for the past three months.
Around plus 69 per cent of respondents said they expected an increase in house prices over the next 12 months.
The report said sales expectations for the coming months were muted, with plus 10 per cent expecting positive sales in the next three months and plus four per cent expecting growth in sales in the next 12 months.
The report noted that there was a more “upbeat” outlook in the North of England, London, Scotland and Northern Ireland.
Simon Rubinsohn, RICS chief economist, said: “Although the mood music around interest rates does appear to be shifting, for now the stronger influence on the housing market is the ongoing imbalance between demand and supply. The inventory on agents’ books appears to have slipped back towards historic lows and this seems to be underpinning both the current price trend and expectations for the next year.
“Meanwhile although there is likely to some drop in activity in the immediate aftermath of the expiry of the stamp duty break, most activity indicators currently remain solid. Indeed, the main challenge for buyers looking forward may once again be a lack of choice of property on the market.”
Signs of market correction
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said the report reflected what was occurring on the “coalface”, pointing to less activity and slower price growth since the stamp duty holiday ended.
He added: “But we’re seeing few signs of a market correction. Many buyers prefer being able to operate in the less frenzied environment prevailing today while continuing to take advantage of stock shortages and low mortgage rates in particular.”
Tomer Aboody, director of property lender MT Finance, added that whilst the stamp duty holiday had ended, a combination of low interest rates and low stock meant house prices would rise “now and for the foreseeable”.
He said: “In particular, houses with outside space are doing well, giving buyers room to work from home and the living conditions they need in this post-pandemic world.”
He added: “Although there is growing speculation about an interest rate rise, this is still unlikely in the short term. If this is the case, and stock levels remain low, property prices will continue to rise. Stamp duty is possibly the only lever left to pull in order to increase stock by reducing or removing it for downsizers.”
Demand for energy efficient homes expected to grow
In this survey, questions were added to gauge consumer attitudes to energy efficient homes and carbon emissions.
A third of respondents said there had been an uptick in demand for energy efficient homes, but said it was not impacting property value. This was backed up by three quarters of respondents saying there was little to no impact of energy efficient property and sale price.
Around 62 per cent of respondents said they expected demand for energy efficient properties to grow in the next three years but cost of improvements was a barrier.
Rubinsohn said: “As long as there is a lack of choice for would-be buyers, it is clear that buyers’ ambition to be more climate friendly will have to move down their list of priorities. The data from today’s report suggests that additional government funding and investment alongside new financial solutions appealing to homeowners, landlords and investors could pave the way for decarbonising UK homes.”