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Housing market showed signs of recovery in February – RICS

  • 09/03/2023
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Housing market showed signs of recovery in February – RICS
The UK housing market was still subdued in February but there were hints of a stable year ahead.

The Royal Institution of Chartered Surveyors (RICS) Residential Survey for the month showed that while activity continued to slip, there was an improvement on January’s mood. 

The responses for the level of new buyer enquiries came to -29 per cent*, a softening of the previous month’s -45 per cent score. While the score still indicates a decline in demand and is the tenth consecutive month to show a negative reading, it was the least negative result since July 2022. 

Tomer Aboody, director of MT Finance, said: “After some months of constant negativity surrounding the housing market with buyers either stalling or waiting for mortgage products to stabilise so that they are more confident they can afford them, we are finally seeing some positivity with a slowdown in the decline. 

“As swap rates stabilise, leading to lower fixed rate mortgages, buyers are slowly returning and looking to secure their home now that they regard mortgages as being more affordable.” 

The level of new properties coming to market also bettered in February and received a response score of -four per cent. This was compared to -12 per cent in January and -22 per cent in December. 

Respondents gave a score of -26 per cent for the number of newly agreed sales they were seeing, an improvement from the previous month’s score of -36 per cent. 

RICS said the time it took for a sale to complete was rising and was now at an average of 19 weeks. 

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Worries about the cost of living and availability of mortgages mean homes are taking longer to sell and keeping prices in check.  

“However, recent falls in lending rates, inflation and increasing property choice is contributing to a readjustment in the previously severe imbalance between supply and demand which we expect to continue into the spring.” 


Stability in the future 

Looking ahead, surveyor respondents expect sales to continue declining with a score of -47 per cent for near-term sales indicating a negative outlook. 

Over the longer term, however, respondents believe the landscape will more stable with a score of -eight per cent. Surveyors were more optimistic as this compared to a score of -20 per cent for the 12-month outlook in January, and a recent low of -45 per cent in August last year. 


Too soon for optimism? 

Sarah Coles, head of personal finance at Hargreaves Lansdown: “Things are getting worse more slowly, but while the agents in the RICS report are finding reasons for optimism, this may be premature.” 

She said buyer numbers, seller numbers, agreed sales and prices were “on their way down” and people were having to accept an offer to shift their properties. 

Coles added: “Despite pockets of enthusiasm, these aren’t signs of a rising market.” 

Tarrant Parsons, senior economist at RICS, said the housing market was adjusting to the tighter lending climate and stretched mortgage affordability was “still weighing heavily on activity”. 

He said house prices were still on a downward trajectory and were expected to continue falling for the first half of the year at least. 

Parsons added: “Going forward, near-term expectations suggest market activity will remain generally subdued over the coming months, although the latest survey feedback shows tentative signs that the ongoing decline in buyer enquiries is now moderating.” 


House price changes 

House prices continued to fall in February. Respondents gave a score of -48 per cent for house price movements during the month, which was little changed from the score of -46 per cent in January. 

This is expected to improve going forward, as the response score for house prices in the next three months came to -55 per cent which was less negative than -63 per cent in January, suggesting house prices will decline but not as severely. 

Prices will continue to slip, but the outlook for the next 12 months has improved. Respondents gave a score of -27 per cent for house prices over the coming year, and this was more optimistic than the score of -40 per cent in January and -61 per cent in November. 

RICS asked an additional question this month about the difference between asking and sales prices. 

In the mainstream market, for homes up to £500,000, 60 per cent of respondents said sales were being agreed below asking price. For homes between £500,000 and £1m, 70 per cent were being sold for less than the asking price. 

For the most part, sales were being agreed within a five per cent margin of the asking price. 


Lettings market 

In the rental market, tenant demand is remaining strong with responses for activity coming to 32 per cent. 

However, landlord instructions continued to decline with a reading of -13 per cent.  

This imbalance in supply and demand is expected to push up rents, with respondents giving a score of 45 per cent for rent expectations. 

* RICS survey statistics are presented as scores between negative 100 and 100, with negative scores implying a decline, and positive readings suggesting an increase. 

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