The Royal Institution of Chartered Surveyors (RICS) residential market survey revealed buyer demand received a net balance score of +8% for respondents citing a rise in enquiries, the most positive reading since February 2022.
At the same time, new property listings were positive for the fourth month in a row, with a net balance score of +13%, pointing to a lift in new instructions.
The direction of house prices was also less negative in March, rising from a net balance of -67% to -4%. This was the seventh month in a row that house price falls eased, according to the RICS survey, which the firm suggested indicated stability in the market.
Recovery in buyer demand
Tarrant Parsons, senior economist at RICS, added: “Demand continues to recover gradually across the UK housing market, with new buyer enquiries rising for a third month in succession, according to the latest survey feedback.
“With the inflation backdrop turning a little less difficult of late, this has led to expectations that the Bank of England will be able to start lowering interest rates later in the year. This should continue to support the market to a certain degree going forward.
“In keeping with this, near-term sales expectations point to an improving outlook, albeit the scope for an acceleration in activity will still be relatively limited given mortgage rates are set to remain much higher than in 2020/21.”
Jeremy Leaf, north London estate agent and a former RICS residential chair, added: “Buyers and sellers are emerging from an extended hibernation, which resulted in a subdued market for much of last year. Better weather is coinciding with much more interest than we have seen for several months.
“However, the increased choice of properties is making it more difficult for buyers to make up their minds as they worry about missing out on an alternative. As a result, decision-making is more protracted and bargaining is harder, so sales are taking longer. Prices are firming up, but concerns about affordability are keeping a lid on sellers who think that more viewings will lead to much higher values.”
Uplifted housing market
Looking ahead, respondents expect the market to be favourable with a net balance of +13%, predicting a rise in sales volumes over the next three months. This compared to a reading of +6% previously.
The positivity and elevated buyer demand is expected to continue, as a net balance of +46% of respondents forecast a rise in sales activity, up from the +42% who said the same in February.
Sara Palmer, distribution director at TML, said: “The property market continues to show signs of improvement as buyer demand recovers. As we head into spring and warmer weather, many in the market will be hoping to see this trend accelerate reflecting the continued recovery of buyer enquiries in March.
“While the Bank of England has not yet taken the decision to reduce rates, expectations are that a reduction in the base rate will be made in the coming months. This will help to inspire confidence in buyers and property investors alike to push forward their purchasing plans. Despite recent signals of a fall in house prices, RICS’ assessment showing a more stable trend will also buoy sentiment.”
Rental prices set to rise
Tenant demand was stable in March, responses to the survey indicated, with a net balance of +19%. This was higher than the score of +16% in February.
However, landlord instructions continued to fall behind demand, with a net balance reading of -19%.
Due to the continued rental supply and demand imbalance, a net balance of +34% of respondents predicted rents would rise over the next three months.
Leaf said: “On the lettings side, affordability constraints are certainly playing their part, with the pressure for higher rents building as supply is still not keeping up with demand. However, the quality of interest remains low, resulting in considerable additional checks to ensure tenants can pay their way for the length of the tenancy at least.
“Gently rising rents are the likely outcome, and certainly the sharp increases seen last year are probably a thing of the past for the next few months at least.”
Improving the home transaction process
RICS also commented on the government’s plan to investigate the homebuying and selling process with a view to making improvements, which was announced last month.
Sams Rees, senior public affairs officer at RICS, said: “As the activity in the housing market increases, we welcome the inquiry into how the homebuying process can be improved for consumers.
“RICS members working as agents and surveyors play a vital part in providing professional advice, ensuring that consumers are well-informed on what for many is the most expensive purchase they will make. Their expertise will help shape the RICS recommendations and evidence to the inquiry committee this month.
“As a founding member of the Digital Property Market Steering Group, we are already working across the sector to identify ways that consumers and industry professionals can have access to the necessary information needed to buy and sell a home, reducing fall-throughs and transaction times.”
