Residential property prices are showing signs of increasing for the first time in almost two years as market activity continued to improve, according to surveyors.
Price growth moved into positive territory last month for the first time since October 2022, the Royal Institution of Chartered Surveyors said, thanks in part to a dip in mortgage borrowing rates.
A net balance of 1% of professionals reported prices rising rather than falling in August – and a balance of 14% expect a steady increase over the next three months.
August’s survey results also reveals an improvement in the number of house hunters, with a net balance of 15% of professionals noticing an improvement in this survey indicator, up from a balance of 4% in July.
On the supply side, the number of new property listings has also shown an increase, with a balance of 7% of professionals seeing a rise in August, up from 3% in July.
As far as the rental market market is concerned, tenant demand continues to rise, albeit at a slower pace, while the supply of rental properties remains sluggish.
The supply-demand imbalance continues to push up rental values, with a net balance of 39% of professionals predict that rents will increase in the months ahead.
RICS chief economist, Simon Rubinsohn, commented: “The latest RICS survey captures an improvement in sentiment over the past month in the wake of the modest decline in mortgage rates with buyer interest improving, albeit from a relatively low base, and stock levels edging up.
“However, anecdotal remarks from respondents still demonstrate the need for realistic pricing to get deals done with uncertainty both around the scope for further interest rate cuts and the likely contents of the forthcoming Budget keeping the mood in check.
“Affordability remains an issue in the sales market even with somewhat cheaper finance now available but the picture appears even more acute in the lettings market where the amount of rental stock continues to diminish. Contributors continue to point to landlords looking to scale back their portfolios which will inevitably increase the imbalance that already exists in the market”.
Reflecting on the latest RICS survey, Tom Bill, head of UK residential research at Knight Frank, said: “This should be the strongest autumn market in three years, with transaction volumes and prices driven higher by falling mortgage rates. There is still uncertainty surrounding tax hikes in the Budget, but financial markets are expecting almost six further rate cuts over the next year, which would bring down borrowing costs further and boost demand following the relative slump in activity of the last two years.”
“The mismatch between supply and demand could grow if landlords believe new government legislation for renters is too punitive. Protection for tenants is a positive thing but if the legislation is not balanced and more landlords decide to sell, falling supply and rising rents would be an unwelcome consequence for renters.”
Sarah Coles, head of personal finance at Hargreaves Lansdown, added: “The gradual drift southwards in mortgage rates is definitely helping the property market, but the timing of the pick-up in demand means renewed enthusiasm is likely to owe more to a sentiment boost from the Bank of England’s rate cut last month.
“It has helped convince buyers that life is likely to get easier rather than harder over the coming months, so they can afford to take the plunge.”