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Agreed sales activity improves in April – RICS

  • 11/05/2023
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Agreed sales activity improves in April – RICS
The level of agreed residential property sales in April improved from a reading of -30 per cent* to -19 per cent, a market study from a trade association has showed.

The Royal Institution of Chartered Surveyors (RICS) Residential Market Survey found that this was also the least negative reading for agreed sales since July 2022. 

New instructions stayed flat during the month, with a small change from negative six per cent in March to negative four per cent in April, according to surveyor response scores. 

Buyer sentiment was relatively weak, however, as demand dropped from -30 per cent in March to -37 per cent in April. This was a significant improvement on the reading of -43 per cent in January. 

RICS said when disaggregated, all parts of the UK recorded either a negative or flat trend in home buyer demand, except for Northern Ireland where a small rise was seen. 

This subdued demand for property and lower agreed sales resulted in a small rise in the average number of properties held on estate agents’ books, with 36 per agent, compared to 35 in March and February. 

The average sales time extended in April, now taking nearly 20 weeks compared to 19 weeks earlier in the year. 

A property trend was also noted, as RICS said that anecdotally, surveyors noticed that buyers were looking for smaller, more affordable homes while others were moving out of older homes into more efficient new builds. 

Surveyors are still reporting a decline in house prices, which response scores remaining in negative territory. In April, the reading for house prices was -39 per cent, however, this was an improvement on net balances of -43 per cent and -47 per cent seen in March and February. 

Looking ahead, house price movements are expected to improve, with surveyors scores coming to -16 per cent in April compared to the -24 per cent recorded in March. 


Housing market challenges remain 

Simon Rubinsohn, chief economist at RICS, said: “Although the newsflow around housing does appear to have steadied over the past month, key indicators from the RICS survey point to a series of challenges in both the sales and lettings space. 

“Most notably, buyer demand still appears to be subdued in the face of relatively high borrowing costs, the prospect of at least one more interest rate hike and ongoing affordability challenges. 

“Meanwhile, the imbalance between demand and supply in the letting market still remains stark despite the significant increase in rents. 

“Critical to addressing both areas of the market is the delivery of more supply. However, indicators of the level of new housing starts in the early part of the year suggest that the picture is if anything continuing to soften as housebuilders activity reflects both macro uncertainty and policy developments.”

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The green shoots of optimism in the property market risk being crushed by cruel reality. Demand has now fallen every month for the past year, and with sales dwindling and house prices dropping, it’s proving more difficult to shift properties. It’s taking almost 20 weeks from first listing to final completion, as cautious buyers guard against hasty decisions.  

“If you look closely enough, there are some positives, with agreed sales looking marginally less miserable than the previous month. And while agents expect things to be rough in the next few months, their expectations have been gradually picking up. The shortage of properties is no doubt putting a floor under prices, and is ensuring that properties that are well priced are eventually finding a buyer.” 

Coles said with at least one more base rate rise expected, there could be a pause in the reduction of mortgage rates which could cause potential buyers to hold off purchasing. 

She added: “It means anyone considering getting a mortgage with a small deposit – or even a 100 per cent loan to value (LTV) mortgage – needs to think very carefully about how they would cope if prices fell and pushed them into negative equity. A short-term dip accompanied by long-term homeownership doesn’t have to be the end of the world, but you need to be realistic about what you might be getting into.” 


Sustained tenant demand

Tenant demand continued to rise across the rental market, with a net balance of 41 per cent for the three months to April. 

In contrast, landlord instructions fell over the same period, with a reading of -24 per cent indicating a decline. 

Due to the supply and demand imbalance, respondents said they expect rental prices to rise over the next few months. 

Coles said there was “no let-up in the relentless squeeze” for those in the rental market. 

She added: “We have seen yet another month of growing demand and dearth of properties to rent, which is pushing rents sky high. Agents say landlords are leaving in droves – not just because of increasing tax and legislation, but because rising mortgage rates and the cost of maintaining the properties just doesn’t add up for an awful lot of them now.” 

Emma Cox, MD of real estate at Shawbrook, added: “The buoyant lettings market continues despite an upward pressure on rents fuelled by rising interest rates and inflation and we expect this will continue with increased competition for rental properties.  

“For professional property investors with ready capital, the current market conditions and recent legislative and tax changes present an opportunity, as more accidental landlords unable to make their buy-to-let ‘work’ seek to sell. With the Bank of England predicted to make further rate rises, those portfolio landlords who can move fast will be able to grow their portfolios and increase market supply with quality buy-to-let properties.”


* 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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