The Royal Institution of Chartered Surveyors (RICS) residential market survey for the month showed new buyer enquiries fell by -39 per cent*, similar to the -38 per cent drop seen in November.
The number of new properties coming to market also slipped by -23 per cent, which was the weakest response score since September 2021. Additionally, agreed sales dropped by -41 per cent suggesting a sustained drop in activity on both sides of the market.
This was down from a reading of -36 per cent in November.
RICS said there were signs of a drop in activity across all regions in the UK, but the North West, Scotland, Wales and London were particularly quiet, according to respondents.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “The house isn’t winning any more, with prices down for the third consecutive month. The trend is gathering pace, as more agents say prices are falling with each passing month, and every region is seeing price drops.
“Falling house prices have a nasty habit of bedding in, because buyers feel they can save money by waiting a bit longer. This depresses demand, and pushes prices down, so more buyers decide to wait-and-see. It means this may just be the start of it.”
Falling mortgage rates
Coles said fixed mortgage rates declining was “one spark of hope” which could bring buyers back into the market.
She added: “However, the pressure from higher prices is likely to keep huge numbers of them away. Inflation may be past the peak, but it’s inching downwards at a glacial pace, so prices will continue to rise at quite a lick.”
Others felt that the impact of falling inflation may help sales increase in the long run.
Tomer Aboody, director of property lender MT Finance, said: “[There is] some possible optimism coming from a couple of months lower inflation, along with government plans to reduce it by half, there could be light at the end of the tunnel. As the impact of this filters through, it could well bring some much-needed confidence back to buyers and sellers alike.”
Energy efficient premium
The December survey also included questions about how energy efficiency impacted buyer behaviour.
It found that 40 per cent of respondents had seen a greater buyer interest for energy efficient homes, while 41 per cent of sellers were adding a premium to property values for homes with a high energy efficiency rating.
Some 61 per cent of respondents found that energy efficient homes tended to retain their value.
Mairead Carroll, senior specialist in land and property standards at RICS, added: “It will be fascinating to see how important energy efficiency becomes to buyers over the next twelve months. We welcome the timely addition of energy-related questions to our residential survey as the cost of living crisis remains a growing concern.
“Anecdotally, we have heard that homebuyers can be left confused by the Energy Performance Certificate (EPC) and the recommendations made, and unsure what areas to prioritise in terms of improving the energy efficiency of their home.
“RICS this week welcomed the independent Net Zero Review, if buyers and sellers are to have confidence in the EPC then reform is required”.
The rental market
Tenant demand for rental homes rose according to 28 per cent of respondents. However, this was the lowest reading for demand since February 2021, which RICS said suggested a slowdown in growth.
New landlord instructions fell, according to -24 per cent of respondents but rents are expected to rise, said 42 per cent of surveyors.
Simon Rubinsohn, chief economist at RICS, said: “The latest RICS Residential Survey highlights the emerging challenges in the housing market as new buyers grapple with more costly finance terms and uncertainty over the outlook for the economy.
“This is reflected in forward-looking RICS indicators around both prices and activity. However, some signs of an easing in inflation pressures more generally could provide a chink a light particularly for those looking to take their first step on the property ladder.
“Meanwhile feedback around the lettings market once again demonstrates the need for some concerted thinking about how to create a thriving sector that caters for both the private and ‘affordable’ renter”.
* RICS survey statistics are presented as scores between negative 100 and 100, with negative scores implying a decline, and positive readings suggesting an increase.
