Housing market sentiment is improving, according to RICS latest residential market survey. The net balance for new buyer enquiries came to negative three per cent in December, which is an improvement on negative 13 per cent* in the prior results.
The report said that this metric has improved in the last four months, with these results in “neutral territory” between plus five per cent and negative five per cent for the first time since April 2022.
The net balance for newly agreed sales is also showing the least negative figure since 2022, with near-term sales expectations going up to 12 per cent, building on seven per cent in the prior month.
For the residential sales volumes in the year ahead, the net balance has climbed by 10 per cent month-on-month to 34 per cent.
The average length of time to complete a sale has fallen to 18 weeks, which is down from a high of 20 weeks in September.
On the supply side, a net balance of plus one per cent was recorded indicating a “generally stable trend” for new instructions.
The average number of homes listed for sale on estate agents’ books also remained stable at 39 for the second month in a row, up from 34 at the start of last year.
However, RICS warned that current stock levels were “relatively low” compared to historical levels.
House price expectations improve
Regarding house prices, the net balance came to a negative 30 per cent in December, which is an improvement from negative 41 per cent and negative 60 per cent in November and October respectively.
RICS suggested that the “downward pressure on prices is diminishing” as this is the least negative position since November 2022. However, it said that most regions were exhibiting negative readings for house prices at the moment.
Near-term price expectations are “marginally negative” at minus 13 per cent, which shows an easing on last month’s net balance of minus 23 per cent.
Participants said they foresee house prices stabilising at the national level but there is variation across the UK, with those in Norther Ireland, North West and Scotland anticipating house prices ticking up in the next year.
Tenant demand continues to rise
Tenant demand rose over the month to net balance of 17 per cent, but this shows a softening over recent months. For instance, the net balance in July was a high of 59 per cent.
Landlord instructions have fallen over the past year and a shortage of supply is continuing to fuel rental prices.
A net balance of 50 per cent of respondents expect rent to rise in the near term, with long-term expectations of a four per cent rental increase over the next 12 months and five per cent per year over the next five years.
‘Encouraging prospects’ for housing market
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said that while inflation had picked up, the “downward trend has prompted a reduction in mortgage rates and lender appetite which in turn has helped to increase activity”.
He continued: “Buyers and sellers are gaining confidence from an expectation that the worst of the market may be behind us, supported by still-strong employment numbers.
“Looking forward, we don’t expect any massive changes but certainly firming prices and more sales agreed than we perhaps dared to expect only a few months ago.”
Tomer Aboody, director of property lender MT Finance, continued that as lenders look to cut rates to increase lending volumes, buyers are “definitely feeling more confident in their ability to buy, both due to affordability but also with the possibility of more stock coming onto the market”.
“2023 was an incredibly flat year for sales, with multiple factors affecting the market, from interest rates rises and high inflation to low stock levels. Better sentiment is expected with encouraging prospects for the year ahead,” he added.
* RICS survey statistics are presented as scores between negative 100 and 100, with negative scores implying a decline, and positive readings suggesting an increase.
