Buyer enquiries were either flat or negative in nine of the twelve regions across the UK in May, according to the Royal Institution for Chartered Surveyors (RICS) UK residential market survey.
The report, which captures the monthly sentiment of chartered surveyors operating in the residential sales and lettings markets, found a drop-off in demand alongside a generally flat trend for agreed sales and instructions.
RICS said sentiment around the twelve-month outlook for sales had weakened as rising living costs and worries over rising interest rates dampened demand; negative 24 per cent compared to negative four per cent previously.
RICS survey statistics are presented as scores between –100 and 100, with negative scores implying a decline, and positive readings suggesting an increase.
House prices are still expected to continue to rise, as demand for housing continues to outstrip demand; the volume of sales agreed was largely flat, with a net balance reading of negative two per cent compared with negative three per cent previously.
Meanwhile, new instructions to sell were also largely flat during May at minus two per cent. This is the weakest since December 2021 and RICS said it believed there was little prospect of a meaningful uplift in the flow of supply coming onto the market in the immediate future.
Given the still constrained supply backdrop, house prices continue to be squeezed higher, with 73 per cent of contributors reporting an increase in house prices during May, although this was down slightly from 80 per cent in April.
When broken down, all parts of the UK continue to see house prices moving upwards, with growth still exceptionally strong in Northern Ireland, Northern England and Wales. In London, 53 per cent expected prices to rise, although this compared to 68 per cent in April.
Twelve-month price expectations did ease at the national level for a third successive month with 42 per cent of survey participants expecting house prices to be higher in a year’s time. This was down from 78 per cent in February and marks the most moderate reading seen since January 2021.
Simon Rubinsohn, RICS chief economist, said: “The increase in the cost of mortgage finance alongside growing concerns about the economic outlook is unsurprisingly having an impact, albeit a relatively modest one at this point, on buyer activity in the sales market.
“Despite this, prices are viewed as likely to remain resilient into 2023. But as is often the case in these circumstances, the pressure is likely to be felt more visibly in transaction levels which are seen as likely to slow as the year wears on.”
Steve Griffiths, sales director at The Mortgage Lender, said: “While we’ve previously seen the UK housing sector defy the odds, demand is now starting to slow. With the rising cost of living and the Bank of England poised to raise rates further this year a slowdown is now on the cards.
“For those still keen to buy this year or remortgage, locking in a cheap rate will be a priority. For those where home ownership is further down the line, ensuring that current financial pressures don’t impact future aspirations will be key. Products like buy now pay later can seem like good deals but can often impact credit scores and lead to difficulties getting a mortgage. For those with blips on their credit score, there are still options available, speaking with a broker will ensure you can still find a suitable product.”
Fear of the unknown