The RICS UK Residential Property Survey for December reports growing activity in the housing market with 2024 capped off in a generally upwards trend.
House sales continue to see an upward trend with +5% (net balance) of respondents reporting an increase in new buyer enquiries. While this is down from the +11% readings posted in November and October, sales volumes have picked up with a net balance of +7% of respondents indicating sale growth, compared to a figure of +1% in November.
New instructions, which measures properties placed for sale, saw a bounce, potentially due to stamp duty changes in March, with a net balance of +14% reported. This is the sixth consecutive month where respondents have indicated an increase in houses being listed for sale.
House prices are now rising in every region of the UK. Northern Ireland and Scotland report the strongest price growth currently.
In the letting market, tenant demand has stabilised however, respondents expect further rent rises (+37%), likely due to a continued trend of landlords placing their properties for sale (net balance +37% from +29% in November.) leading to a lack of supply for tenants. So whilst demand is broadly flat, supply is diminished, leading to a lack of available property to rent and price rises.
Rising gilt yield present a potential challenge for the housing market over the coming months although for now at least, respondents to the survey remain reasonably upbeat about the medium-term outlook.
Tom Bill
RICS chief economist, Simon Rubinsohn, said: “The latest results from the RICS Residential Market Survey points to a further improvement in sentiment in the housing market despite concerns about the potential impact of rising bond yields on borrowing costs. Buyer enquiries rose once again, albeit at a slower pace than in November, and the headline price indicator also moved higher.
“More significantly, the signals from the survey around expectations over the next twelve months also remain solidly positive for now. However, the resilience of the uplift in market mood could be tested if the mortgage rates do begin to climb in a material way over the coming months. That, critically, would also be a concern for developers who will want to see a solid market as a backdrop for ramping up housebuilding to help meet the government’s ambitious 1.5 million homes target for this parliament.”
Reflecting on the latest RICS report, Tom Bill, head of UK residential research at Knight Frank, added: “Demand will come under more pressure as the impact of higher borrowing costs feeds through into mortgages. Financial markets are often more volatile in January and President Trump’s inauguration has added to the instability in debt markets this year, intensifying the mortgage pain caused by the Budget. Cracks have appeared in the UK housing market since October but what Labour does next will dictate how wide they grow.”
Jeremy Leaf
Jeremy Leaf, north London estate agent, added: “As far as sales are concerned, these historically-reliable figures confirm what we’re seeing at the sharp end.
“Despite continuing worries about the cost of living and seemingly slowing pace of mortgage rate cuts, buyers are taking advantage of more property choice while sellers try to attract those wanting to move before higher stamp duty charges apply in April.
“However, overall caution remains so there are more viewings before offers are submitted and transaction times are lengthening.
“Hopefully, the Bank of England follow the government’s current mantra of trying to boost growth and cut interest rates soon, which will inevitably improve housing market activity rather than keeping rates higher to control inflation.
“On the lettings side, we are finding landlords still leaving the market when tenancies end due to concerns about the consequences of the soon-to-be introduced Renters’ Rights Bill which will make it harder to remove disruptive or non-rent paying tenants. Some rents rose so far and fast at the beginning of last year that we are often struggling to match those figures when the same properties become available now. Nevertheless, shortage of stock, particularly of smaller one- and two-bedroom flats, has kept rents higher than they might have been – a trend which is likely to continue for the next few months at least.”