There are more sellers putting their homes on the market but the outlook remains cautious because of ongoing uncertainty around interest rate cuts, surveyors have warned.
Over a fifth, 21%, of property professionals reported new selling instructions are rising rather than falling, marking the strongest reading since October 2020, the Royal Institution of Chartered Surveyors (RICS) said.
On average, estate agents’ branches had 42 properties, the highest number recorded by RICS since February 2021, with those surveyed noting an increase in market appraisals during the month, compared with the same period last year.
Sarah Coles, Yahoo Finance UK columnist and head of personal finance at Hargreaves Lansdown, warned that despite the encouraging figures, the property market might still be struggling.
“The housing market inspired more confidence in February, as buyers slowly resurfaced, and optimism rose among estate agents. However, given the broader picture, there’s still a risk that February may not have been flying after all. It could just have been falling with style,” she said.
The proportion of UK mortgages in arrears has risen to its highest level since 2016 as households continue to struggle with high interest rates.
The value of outstanding mortgage balances with arrears increased by 9.2% between October and December from the previous quarter, to £20.3bn, and was 50.3% higher than a year earlier, according to Bank of England data.
“There’s also less positive news from the mortgage market in recent weeks. Many of those agreeing sales at the moment will have agreed their mortgages back when rates were slightly lower. Since then, the market has reassessed the chances of an imminent rate cut, and put mortgage rates up.
“The average 2-year rate dropped from 5.93% on the 2 January to 5.56% at the end of the month, according to Moneyfacts. However, by the end of February, the average 2-year mortgage rate was back up to 5.75%. It could stifle demand as the impact feeds into the market,” Coles added.
Across the UK, new buyer inquiries grew for the second month in a row, with a net balance of 6% of professionals reporting a rise rather than a fall.
Most areas of the UK have shown a recovery in buyer interest over the past two months, the report said.
However, home sales were broadly flat in February, with a balance of 3% of professionals reporting a decline rather than an increase.
Simon Rubinsohn, RICS chief economist, said: “The February RICS survey provides some grounds for encouragement around the sales market with not just buyer interest staying positive for the second successive month, but also the uplift in new instructions to agents.”
Looking ahead, the sales expectations for the near term are positive and sales activity is expected to gain further momentum over the year ahead, the report said.
Markets are now pricing in three 0.25% cuts from the Bank of England by the end of the year, having forecast just short of three full cuts before the data came out.
In the lettings market, tenant demand continues to rise but at a more modest pace than previously, according to RICS.
At the same time, however, landlord instructions are still dwindling. Professionals were expecting rents to move higher over the months ahead, albeit at a slower rate.
Tom Bill, head of UK residential research at estate agent Knight Frank, said: “The economic data has fluctuated since Christmas but the direction of travel for the housing market is up.”
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