Property professionals confirm increase in property costs for the first time in a two-year period, according to the Royal Institution of Chartered Surveyors (RICS) report.
The UK housing market, which showed signs of recovery earlier in the year, has experienced a setback, according to the Royal Institution of Chartered Surveyors (RICS) survey. By July 2023, the recovery had stalled and lost momentum, with a decline in buyer enquiries and agreed sales, indicating a weakening market.
In July, house prices nationally showed some declines, with price reductions being the highest for that time of year since the beginning of 2023. However, regional variations existed. Prices declined most in East Anglia but continued to rise in Northern Ireland, Scotland, and the Northwest of England.
The rental market remained stable in tenant demand, but fewer landlord instructions suggested potential rent increases ahead. The RICS survey also indicated a higher tenant demand, with a net balance of +22% of respondents reporting an increase in September.
The RICS president, Tina Paillet, stated that the Renter's Rights Bill aims to improve standards and offer better protections for tenants. However, she adds that the planned changes in the private rental sector fall short of tackling the core issue: increasing supply and making housing more affordable for tenants.
Despite the challenges, sales sentiment has turned positive over the past two months. In September, a net balance of +11% of respondents said house prices were rising, and this figure increased to +45% over the next 12 months, according to the RICS survey. Tarrant Parsons, head of market analytics at RICS, stated that the survey results indicate a brighter picture for housing market activity.
The government's introduction of new legislation to improve renters' rights has caused concern among some landlords, who believe it will erode their profits further. The high mortgage rates, while reduced due to the Bank of England's base rate cut on 1 August, remain high compared to their long-term history.
This is the first time the figure has been positive since October 2022. A net balance of +23% of respondents believe the sales market will continue to grow over the next three months. Moreover, a net balance of +14% of respondents reported an increase in new buyer enquiries in September.
Tomer Aboody, director of specialist lender MT Finance, states that house prices are increasing against a lower benchmark from 2022 following the adverse market reaction to Liz Truss's Budget. These factors suggest that while the UK housing market recovery may have stalled in mid-2023, there are signs of a modest improvement over the next year.
[1] Nationwide (2023). House price report for July 2023. [Online]. Available: https://www.nationwide.co.uk/media/house-price-index/2023/07/july-2023-house-price-report
[2] RICS (2023). Residential Market Survey - July 2023. [Online]. Available: https://www.rics.org/uk/knowledge-insight/economic-indicators/rics-surveys/residential/residential-market-survey/
[3] RICS (2023). Residential Market Survey - September 2023. [Online]. Available: https://www.rics.org/uk/knowledge-insight/economic-indicators/rics-surveys/residential/residential-market-survey/
- Despite a setback in the UK housing market, homebuyers might find some optimism in the rising interest rates predicted over the next 12 months, as such rates could potentially impact the finance sector and make investing in property more appealing.
- Real-estate analysts are closely monitoring the Rics survey results, as the positive sentiments towards the sales market over the past two months could indicate a potential recovery trend for the property market, particularly in regions like Northern Ireland, Scotland, and the Northwest of England.
- The improved property market outlook and the stabilizing rental market might prompt real estate investors to reassess the current housing-market dynamics and potentially re-enter the market to capitalize on any opportunities arising, given the weakening buyer demand and rental landscape.
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