According to the Royal Institution of Chartered Surveyors (RICS) latest residential market survey, new buyer enquiries at the national level reached a net balance of nine per cent during March. This was the seventh consecutive positive reading for this indicator, but this figure is down from 16 per cent in the previous survey.
The gap between supply and demand is closing for the first time since March 2021, with the net balance of new instructions at eight per cent, showing a flattening year-on-year trend of appraisals over the past three months. Despite this, inventory remains “close to historic lows”.
Agreed sales rose to a net balance nine per cent, a figure unchanged since February, which “remains indicative of a steady upward trend in transaction numbers”.
Near-term sales expectations remain modestly positive, at a net balance of 16 per cent, compared to a net balance of 11 per cent previously. The twelve month indicator points to a broadly stable outlook for residential sales volumes nationally.
RICS’ survey scores are recorded on a net balance of -100 to 100, with a negative score indicating a decline in activity and a positive score suggesting a rise.
Estate agents cited an increased interest from international buyers, more demand for outdoor areas, the effects of inflation and shortages caused by the war in Ukraine, and potential sellers feeling the market uncertainty as impacting factors, among others.
Respondents to the survey anticipate that positive housing activity will remain the case in the coming quarter. However, there is general concern that the rising cost of living and higher interest rates are yet to come into play and will likely have a greater impact the long term.
Peter Beaumont, chief executive at The Mortgage Lender, said the increased stock coming to market “encouraging” but that “overall shortage is still an issue and buyer demand is always present even in the midst of the cost of living crisis”.
He continued: “The knock-on effect this has only increased the challenges first-time buyers and home movers alike face in terms of affordability as house prices continue on their upward trajectory.”
He said that lenders have a responsibility to ensure any loan is affordable.
“Many lenders have begun to take in to account the cost of living crisis, tax rises, and soaring energy bills when calculating how much they can lend to a borrower. With increasing pressure on household finances, this may impact the size of loan buyers can afford, subsequently making them reset their property expectations. This may cool buyer activity slightly, though only time will tell by how much,” Beaumont explained.
House price growth strong across the UK
All parts of the UK continue to see a strong pace of house price growth, with Northern Ireland, Wales and the North of England seeing particularly sharp rates of house price inflation.
An aggregate net balance of 74 per cent of respondents saw a continued increase in prices over the latest survey period. This is in line with February’s results and almost identical to the 75 per cent average for the past year.
Respondents across all areas predict further growth in house prices at both the three and twelve month points, at 30 per cent and 65 per cent respectively.
Those surveyed predicted that house prices would grow four per cent per year at a national level over the next five years.
Rental growth expected to rise five per cent per year
In the lettings market, tenant demand continues to rise at a robust pace, with 54 per cent of respondents citing a rise in March. Landlord instructions have increased for the first time since July 2020, with the latest balance up to six per cent from -21 per cent.
Rental growth expectations remain high at 64 per cent, one of the strongest readings to date. All regions are likely to see further increases in rental prices over the next three months. Over the year ahead, rents are expected to rise by approximately four per cent, while five-year projections sit at around five per cent per year through to 2027.