The latest RICS UK Residential Survey, released today, has raised concerns about the state of the housing market. Based on the sentiment of surveyors, the survey reveals a net balance of 40 percent of respondents reporting an increase in tenant demand on the lettings side. However, simultaneously, the net balance for landlord instructions has dropped by 36 percent. This highlights a worrisome trend of rising tenant demand struggling against a shortage of available properties. In fact, this survey marks the largest decline in landlord instructions since May 2020.
The persistently high demand for rentals in the face of limited housing options has led 53 percent of surveyor-contributors to anticipate a near-term rise in rental prices. On the sales side, the survey indicates a decline in new buyer enquiries, with a net balance of minus 45 percent, down from minus 20 percent in May. This figure represents the lowest reading since October 2022. Respondents from all regions of the UK reported a consistently negative trend in buyer enquiries compared to May.
The survey also revealed a decrease in newly agreed sales, with the net balance falling to minus 34 percent this month, significantly weaker than the figure of minus eight percent in May. This represents the most pessimistic result since December 2022. Moreover, the survey indicator reflecting national house price trends declined to a net balance of minus 46 percent, down from minus 30 percent in May. Price expectations for the next three and 12 months now firmly reside in negative territory.
Of particular note, 58 percent of survey participants expressed that homes with better energy efficiency credentials are maintaining their value in the current market. This emphasizes the growing importance of sustainability within the housing sector.
Simon Rubinsohn, RICS Chief Economist, commented on the survey results, highlighting the visible impact of increased interest rates on mortgage rates, which has influenced buyer enquiries, sales, and prices, causing a retreat in these metrics over the past month. Rubinsohn noted that activity levels are expected to remain relatively subdued in this environment. However, he emphasized the importance of pricing homes based on current market conditions rather than recent history, as sales are still taking place when this approach is adopted.
Rubinsohn also pointed out that although house prices have experienced a slight decline from their recent highs, they remain significantly above pre-pandemic levels. While further declines are possible, they should be considered in the context of the market’s previous strength. Additional questions included in the survey support the notion that properties with better energy efficiency credentials are holding their value better than others.
The findings of the RICS UK Residential Survey highlight the challenges faced by the housing market, with dwindling landlord instructions and declining buyer enquiries. The imbalance between demand and supply continues to drive rental prices higher, while sales activity remains subdued. The housing market’s future trajectory will depend on various factors, including interest rates and the evolving demand for energy-efficient properties.