The UK housing market continues to pick up, the latest Royal Institution of Chartered Surveyors (RICS) Residential Market Survey shows.
The September 2024 survey found that demand, sales, and new listings had all returned to growth, while sentiment related overall national house price growth for the first time since October 2022. The outlook also looks broadly positive.
Overall demand from buyers recorded a +14% result (net balance), the third month in a row indicating growth. Sales sentiment also saw a rise, although more marginal (+5% net balance). Near-term, a net balance of +23% of respondents believes the sales market will continue to grow over the next three months, while longer-term twelve-month growth sentiment is even stronger (+45%).
New listings are also up, encouraging a growing demand, according to respondents (+22%). This is a clear rise from the previous month’s +9% result, indicating a readily available supply of property for sale. Respondents also cited potential rises in Capital Gains Tax (CGT) encouraging homeowners to list their properties for sale.
Additionally, according to respondents, house prices are growing overall at a national level for the first time in two years, although some regions are seeing less of a rise – West Midlands, the South West and East Anglia. September’s survey posted a +16% national price reading, up from a flat 0% result in August and positive for the first time since October 2022.
The lettings market continues to demonstrate a growing divide with demand continuing to grow and outstrip supply. September saw a +22% result for tenant demand, indicating another increase. Meanwhile, the survey reported a further drawdown in properties listed for rent, with a -29% retreat. This trend is further influenced by some landlords listing their properties for sale before potential CGT rises. Unfortunately for renters, the continuing squeeze on supply will likely mean further rent rises and difficulties finding property.
There appears to be a greater level of positivity in the market, likely connected to recent interest rate cuts by the Bank of England and a growing belief that more will come in the next few months. A potential rise in CGT is also compelling some homeowners to add their properties to the market, however this is unfortunately contributing to a lack of supply for renters.
RICS President, Tina Paillet, said: “As we approach the 100-day mark of the new government, it is encouraging to see housing prioritised so strongly. The government has moved quickly to outline ambitious planning reforms and set housing targets aimed at increasing supply. Proposals for new towns, urban expansions, and the creation of ‘grey belt’ land demonstrate a clear commitment to addressing the country’s housing challenges.
“Now, it is crucial for developers and investors to feel confident that these reforms will not create planning, skills and resources bottlenecks, so we can make meaningful progress toward the goal of delivering 1.5 million new homes.”
Pailet continued: “RICS survey results continue to highlight the pressures on renters, with demand consistently outstripping supply. While the Renter’s Rights Bill aims to improve standards and offer better protections for tenants, we must ensure that these reforms do not discourage responsible landlords from remaining in the market. Most importantly, the planned changes in the private rental sector fall short of tackling the core issue: increasing supply and making housing more affordable for tenants.”
RICS head of market analytics, Tarrant Parsons, commented: “The latest survey results once again convey a brighter picture for housing market activity, with the recent easing in mortgage interest rates continuing to support a recovery in buyer demand.
“Critical for the outlook, a further unwinding in monetary policy is anticipated over the months ahead, which should create a more favourable backdrop for the market moving forward. In keeping with this idea, forward-looking sentiment data from the survey points to sales volumes gaining impetus, both in the near-term and over the next twelve months.”
Reflecting on the latest RICS Residential Market Survey for September, Tom Bill, head of UK residential research at Knight Frank, commented: “Demand has been supported by falling mortgage rates in recent months but any positivity has been offset to some extent by a mood of uncertainty ahead of the Budget. The prospect of tax rises and the fact people are still rolling off relatively lower fixed-rate mortgages will keep a lid on demand this autumn and we expect UK prices to grow by low single digits this year.”
As far as the tental market is concerned, Bill added: “Supply could come under more pressure if the Renters Rights Bill fails to adequately calibrate the needs of landlords and tenants as it passes through Parliament. We haven’t seen an exodus of landlords but rents could be pushed higher if more decide to sell up, which would be self-defeating for the government.”
Tomer Aboody, director of specialist lender MT Finance, noted: “With lower rates and potentially a further cut in base rate on the way, buyers are feeling more confident about taking the plunge.
“Lower rates are resulting in better affordability, which is enabling buyers and sellers to be more active than they have been during the past 24 months, after rates shot up and left the market reeling.
“Although property prices are rising, we need to remember that they’re increasing against a lower benchmark from 2022 following the adverse market reaction to Liz Truss’ ill-advised Budget.
“Talking of budgets, we await to see what Rachel Reeves will deliver later this month, but very few are holding their breath for a positive outcome.”
Jeremy Leaf, north London estate agent, said: “The sales market has certainly improved since mid-August when the base rate was reduced.
“However, the imminent ‘painful’ budget means the mood on the street among buyers and sellers – particularly of higher-end homes – lies somewhere between spooky Halloween and exciting fireworks’ night.
“If the chancellor’s message is even slightly better than some of the pessimists are suggesting, we anticipate a modest bounce over the next few months. On the other hand, the reverse will mean much of the recent renewed optimism will go up in smoke on 5 November.
“Either way, the rise in listings and more competitive mortgage rates is likely to result in little significant change in house prices or transaction lengths over the next quarter.”
On lettings he added: “The unfortunate loss of too many good landlords from the private rented sector without being replaced in sufficient numbers has meant choice for the steady increase in tenants is limited, resulting in hardening rents.
“When the implications of the Renters’ Rights Bill are more fully appreciated as it passes through Parliament, other landlords may follow suit if unable to sell before the expected CGT increase in the Budget.
“However, in our offices we have noticed affordability concerns are weighing heavily on tenants so a significant proportion are simply unable to afford to pay much more. Therefore, renewals are up and landlords remaining in the sector are insisting on even stricter references before proceeding.”