The RICS UK Residential Property Survey for July 2024 reports a mixed but slightly improved picture for the UK residential property sector. With average mortgage rates lowering as anticipated due to a Bank of England rate cut, there is a sense of improved positivity in the market. However, the full impact of these changes will not be seen until next month’s report.
New buyer enquiries increased modestly, marking a positive shift with a net balance of +2%, up from -6% the previous month. This is the first positive figure in four months, indicating a slight uptick in market interest. The number of agreed sales also showed improvement, although still in negative territory at -2% (net balance), it is a notable rise from -13% in May and -6% in June. Near-term sales expectations have risen to a net balance of +30%, the highest since January 2020, with long-term sales expectations also more optimistic at +45% (net balance), up from +40%.
House prices continue to fall on a UK-wide level, with a -19% (net balance) result. Most English regions showed negative sentiment towards prices, particularly East Anglia and Yorkshire & the Humber, while Scotland and Northern Ireland saw prices rising. Looking ahead, 46% of respondents expect house prices to be higher in a year’s time.
In the rental market, the gap between supply and demand continues to widen. Demand is rising modestly, with an 18% net balance, while landlord instructions are at a -16% net balance, indicating further likely increases in rental prices.
RICS Chief Economist Simon Rubinsohn noted the government’s focus on boosting housing development and the recent base rate cut as factors shifting the sales market’s outlook positively. However, he acknowledged significant challenges ahead in planning reform and the uncertain path of future Bank of England rate cuts. Rubinsohn also highlighted the ongoing difficulties in the lettings market, with demand outpacing supply and landlords reducing their holdings due to an increasingly challenging investment environment.
Industry comments:
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “We have noticed more optimism about prospects for the housing market now that election uncertainties are behind us and mortgage rates seem to be heading south.
“However, with so many buyers and sellers on holiday, demand and the pace of transactions has only picked up a little and we expect a stronger bounce-back in September.
“We have seen renewed interest from small builders and investors too, keen to take advantage of what they believe will be a stronger sales performance next year.
“On the other hand, rents have been softening a little in response to an increase in supply which is forcing some landlords to be a bit more flexible in order to secure better-quality tenants.
“Looking forward, September is generally our busiest time of the year for lettings boosted by students seeking accommodation in time for the new academic year, so we anticipate the small falls in rents to be temporary only.”
Tomer Aboody, director of property lender MT Finance, says: “A definite shift in positivity over the past month is evident due to the expected (now a reality) interest rate reduction, along with cheaper mortgage rates.
“While transaction volumes are still low, hopefully a further reduction in mortgage rates can boost these and increase volumes.
“Further homes are definitely needed and assistance for buy-to-let landlords should also be a focus, as demand for rental property is outstripping supply, pushing up rents. We wait to see if the Chancellor has some positive news for the property market in her October Budget.”
