According to the Royal Institution of Chartered Surveyors (RICS) UK Residential Market Survey for September, buyer demand and agreed sales stayed in negative territory for the third month in a row.
Buyer enquiries weakened further, slipping to a reading of minus 19%, down from readings of minus 8% and minus 18% over the previous two months. RICS said negative buyer demand had become “firmly entrenched” recently and most parts of the UK were seeing a decline.
Surveyors gave a score of negative 16% for the level of agreed sales in September, which was less negative than the minus 24% reading returned in August. RICS said this still indicated a “weakening picture” for sales activity.
In the near term, respondents gave a reading of negative 9% for sales expectations, down from a score of negative 4% previously. Over the next 12 months, expectations for sales received a score of negative 9%, the first negative reading since August 2023.
RICS said this indicated that respondents did not expect things to improve soon.
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For new instructions, surveyors gave a score of negative 15% for the flow of new listings coming to the sales market, the second negative reading in a row and a break in the 13 consecutive positive scores given previously.
Further, respondents suggested that the number of market appraisals undertaken was below levels seen a year ago. This also declined from minus 7% in August to minus 24% in September.
House price rises modestly subside
Respondents gave a score of minus 15% for house prices, little changed compared to the reading of minus 18% in August.
RICS said this suggested house prices were moderating, but the decline was modest.
Regionally, the downward trend was more prevalent in the South East, with a reading of negative 43%, and East Anglia, which was negative 38%. By contrast, respondents in Scotland and Northern Ireland reported rising house prices.
In the next three months, surveyors gave a score of minus 21% for house price expectations, suggesting more declines ahead. However, over the long term, a score of 12% was given, pointing to increases in 12 months’ time.
Housing market on pause until the Autumn Budget
Tomer Aboody, director of specialist lender MT Finance, said: “With constant negativity surrounding the upcoming Budget, both buyers and sellers alike are either biding their time to see what materialises, or are trying to be active but at lower asking prices.
“With Kemi Badenoch announcing that a new Conservative government would axe stamp duty on primary residential purchases, could this possibly persuade Rachel Reeves that stamp duty is a huge barrier to the market and should be reduced or potentially restructured?”
Emma Cox, managing director of real estate at Shawbrook, added: “Reduced buyer demand and declining sales activity remain symptoms of an uncertain market landscape.
“Although interest rates are more stable, and there are signs of house prices cooling, buyers are not pushing ahead with deals. With the Autumn Budget approaching, it’s likely that first-time buyers in particular are holding off in the hope that some form of incentive will be introduced – especially in the wake of the removal of stamp duty exemption earlier this year.”
Tenant demand stays steady
In the rental market, respondents suggested flat tenant demand, with a reading of minus 1%. Landlord instructions also fell, with a reading of minus 38% – the most negative reading since May 2020.
Despite this, rental increases held up, with respondents giving a score of 23% for the direction of prices over the next three months. For the next 12 months, respondents expected rents to continue increasing, with a reading of 3%.
Cox added: “While rental demand has largely stabilised, it remains high overall – which should encourage landlords, as prospective buyers continue to turn towards the rental market. It signals that opportunities remain for professional landlords to add to their portfolios and cater for ongoing tenant demand.”
Jeremy Leaf, North London estate agent and a former RICS residential chair, said: “The imminent arrival of the Renters’ Rights Bill and other regulations, which are likely to add to costs and difficulty of regaining possession, has given further impetus to landlords minded to sell. Conversely, the amount of choice for buyers – often of smaller flats and houses – as well as weaker demand, has made it more of a struggle than many anticipated so some are returning to lettings.
“Demand remains steady, so there’s a strong possibility that rents will resume a more rapid upward trajectory sooner rather than later.”
