UK housing market confidence fell in May as demand weakened, surveyors say

Confidence in the UK’s housing market fell last month, according to surveyors.

The Royal Institution of Chartered Surveyors (Rics) found that a net balance of 8% of property professionals saw home buyer demand falling rather than rising in May, marking the weakest reading since November 2023. The report indicated that buyer demand was weakest in the South East and South West of England.

With demand softening, Rics reported that house prices fell slightly in May, with a balance of 17% of professionals seeing prices fall. However, Scotland and Northern Ireland defied this trend, with house prices continuing to rise.

Survey participants also reported a decrease in the number of sales agreed during May, although sales volumes are expected to rise modestly over the next three months, the report said. Looking ahead, the outlook for the next 12 months remains relatively positive, with 43% of survey participants anticipating an increase in sales activity, up from 33% in April.

Meanwhile, a mismatch in the private rented sector continues, with demand significantly outstripping supply. This leaves renters grappling with rising living costs and declining affordability levels, Rics added. A net balance of 35% of professionals saw tenant demand rise rather than fall.

Rics chief executive Justin Young commented: “Despite an improving overall outlook, today’s data reveals that confidence in the housing market is beginning to dip just as parties launch their manifestos. Greater attention must be paid to improving conditions for ‘generation rent’, who are faced with rising rents and a lack of suitable options.”

“This particular demographic typically made up of people aged between 18 and 40 has doubled in the last two decades, so politicians need to focus on them, as well as homeowners, as a means of gaining the support of a growing portion of the electorate.

“The housing market needs policies that think longer term, not short, and awareness that the different tenures are interlinked, so there is no one solution that will fix the situation. With the market under strain, the supply and demand gap in both lettings and buy side continues to create issues.”

Tarrant Parsons, Rics senior economist, noted: “The recent recovery across the UK housing market appears to have slipped into reverse of late, with buyer demand losing momentum slightly on the back of the upward moves seen in mortgage rates over the past couple of months.”

“Nevertheless, expectations point to this delaying, rather than derailing, a modest improvement going forward. Indeed, respondents continue to envisage a more positive trend in sales activity coming through over the year ahead, although this is likely predicated on the Bank of England being able to start lowering interest rates in the coming months.”

Data revealed on the Financial Conduct Authority’s website this week suggest that at least 1.1 million mortgages have availed one or more of the options stipulated in a mortgage charter, which many lenders have agreed to in an effort to assist struggling borrowers. The charter was launched in June 2023 and has been signed by lending firms that represent approximately 90% of the mortgage market.

The charter outlines various possible solutions for borrowers, including permitting customers who are current with their payments to switch to interest-only payments for six months, or to lengthen their mortgage term with the opportunity to revert to their initial term within six months.