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Housing market set for post-election revival – RICS

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  • 11/07/2024
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Housing market set for post-election revival – RICS
Surveyors expect a recovery in sales activity in the UK housing market following the general election and the predicted fall in mortgage rates, a poll found.

The Royal Institution of Chartered Surveyors’ (RICS’) UK residential survey for June showed that respondents returned a score of 20% for sales activity over the next three months. 

RICS said this pointed to confidence in the newly elected Labour government, which has pledged to build one-and-a-half million homes over the next five years. 

This was up from a reading of 10% last month for near-term expectations and was the most positive sentiment for sales since January 2022. 

Despite this optimism among surveyors, the housing market remained subdued in June. 

Respondents returned a score of -7% for newly agreed sales during the month, which was less negative than the -13% reading in May. RICS said the two consecutive downbeat readings came after a short recovery earlier in the year, but this seemed to reverse. 

New buyer enquiries also stayed muted, with the score easing from -8% in May to -7% in June. This was the third month running where enquiries had slowed, according to respondents. 

Tarrant Parsons, senior economist at RICS, said: “Although activity across the housing market remained subdued last month, forward-looking aspects did improve slightly.

“There are some factors emerging now that could support a recovery in the months ahead. If the Bank of England does decide that the current inflation backdrop is benign enough to start loosening monetary policy next month, this may prompt a further softening in lending rates. In addition, the recent election delivered a clear outcome, with housing pushed up the political agenda.” 

 

Fresh optimism for the housing market?

Sarah Coles, head of personal finance at Hargreaves Lansdown, said the new government “breathed a new air of optimism into the property market”.

She said agents were hoping for a pick-up in sales and house prices, but it was yet to be seen whether buyers had the same view.

Coles added: “Before the election, June brought more of the bad news the market has been used to seeing – with falling sales and prices, and dwindling buyer numbers. Things were so miserable that even the number of new sellers fell back. It wasn’t helped by stubbornly high mortgage rates, with Moneyfacts figures showing the average two-year fixed rate remained just shy of 6% for most of the month.

“July may hold more hope, in part because of the election result, and the arrival of a new government. This isn’t because of anything promised during the campaign. Labour didn’t pledge any particular policies to boost demand – except an extension of the mortgage guarantee scheme for those with smaller deposits. Instead, agents are holding out hope for an upswing in consumer sentiment, buoyed by the optimism that a change at the top can engender, and hope that life in general will change for the better.”

Coles continued: “We will have to see whether this materialises, and encourages more enthusiastic buyers into the market in the weeks to come. In the interim, if you’re looking to buy right now, this remains a buyers’ market, so there should be some bargains to be had. If the agents are right, you may need to take advantage of a relatively small window of opportunity. If optimism catches on, you’ll be competing with more buyers and hopeful sellers will hold firm on prices.”

Jeremy Leaf, North London estate agent and a former RICS residential chair, said the election had a “limited impact” on his firm’s buyers and sellers because “the outcome had been largely factored in” and “the pace and level of mortgage rate reductions was much more relevant”.

Leaf added: “Over the past month and particularly since the result, we have seen a rebound in confidence and activity.

“However, we are not getting carried away, as the increased choice and continuing economic concerns will keep the higher price aspirations of homeowners in check.”

 

Drop in property listings and appraisals 

The six-month run of positive readings for the flow of new instructions ended in June, with a score of -9% given by respondents. 

This coincided with a notable fall in market appraisals, which returned a reading of 1%, down from 17% in May. 

RICS said as the figure for market appraisals in June was so close to zero, it suggested that the level of appraisals was flat when compared with last year. 

House price movement was unchanged in June, with respondents returning a score of -17%, the same as the month prior. 

This indicated that house prices were still trending downward, and RICS said that within this, East Anglia, the South East and South West of England had the most notable negative readings. 

In contrast, house prices in Northern Ireland and Scotland were increasing, with readings of 64% and 29% respectively. 

In the near term, the expectations for house prices rose to 5% following a series of negative readings. RICS said the neutral response suggested the decline in house prices was coming to an end. 

Over the next 12 months, surveyors expect house prices to rise, as indicated by a score of 41%. 

 

Tenant demand increases 

The RICS survey showed tenant demand was still picking up, as indicated by a reading of 28%. 

However, new landlord instructions declined from a reading of -3% in May to 11% in June. RICS said this pointed to a “renewed decline” in rental listings. 

Looking ahead to the next three months, 38% of respondents expect rental prices to rise. 

Since January, the reading for near-term rent increases has stayed within the range of 34% and 38%. 

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