House prices, sales levels, new listing numbers and buyer demand remained sluggish last month, but there are signs the picture looks set to improve in the long run, a closely-watched survey of chartered surveyors has revealed.
While the coming months look set to remain bumpy amid a ‘tighter lending environment’, sales volumes are expected to pick up as over the longer term.
Nationally, property prices continued to fall last month, according to the Royal Institution of Chartered Surveyors’ latest estate agents survey.
East Anglia, the South East, the West Midlands and London saw the biggest house price drops last month, but overall prices nationally still fared better than in February.
Rics said a headline net balance of -43 per cent of respondents reported a fall in property prices in March.
Prices: Property prices across the UK continued to fall in March, new findings from Rics claim
It added: ‘Although this remains consistent with a clear downward trend in prices, the latest reading is marginally less negative than the figure of -47 per cent seen in previous iteration of the survey.
‘As such, this breaks a sequence of ten consecutive months in which this indicator had deteriorated between April 2022 and February 2023.’
Looking ahead, twelve-month price expectations are now broadly flat in London, while contributors based in Northern Ireland, Scotland and Wales envisage a rise in house prices.
Summing up the findings, Rics said the results, for the short-term at least, ‘reflect a generally weak market backdrop’.
James Brown, a chartered surveyor at Norman F Brown in Richmond, Yorkshire, said: ‘The market remains sluggish. Many buyers are sitting on their hands simply watching the market.’
Simon Rubinsohn, Rics’ chief economist, said: ‘The overall tone of the feedback received from respondents to the latest Rics Residential Market Survey is still one of caution towards the sales market, which is reflected in both the headline price and activity indicators.
‘Deals are being done, but a theme coming through in the anecdotal remarks is the need for vendors to recognise the shift in market dynamics. Significantly, there is also a sense that the medium-term outlook is looking a little more settled, helped by the perception that the interest rate cycle may be near the peak.
‘Meanwhile, the rental market remains hugely constrained by the lack of stock.
‘Indeed, the consistency of the message from contributors to the survey about the shortfall of properties to rent and the impact this is having on rent levels is striking. The shifting tax and regulatory environment are highlighted as impacting the viability of many landlords operating in the sector. ‘
For new buyer enquiries, a headline net balance of -29 per cent of estate agents surveyed reported a fall in demand during March
Sales: The longer-term picture for UK property sales is improving, Rics said
Variations: A chart showing what’s been happening to property prices in your region
Rics added: ‘When disaggregated, the downturn in buyer demand remains widespread across the UK, with virtually all regions and the four nations posting a negative reading in the latest returns.’
The national net balance of agreed sales slipped to -31 per cent in March, down from a figure of -25 per cent for February, but still less negative than the recent low of -43 per cent reported in October 2022.
In the short-term, sales levels look set to remain sluggish, but are expected to improve as the months roll on, the Rics said. The survey reading for newly agreed sales over a 12-month view shifted into positive territory for the first time since March 2022, it added.
Stock levels remain a major issue across the housing market, with fresh listings falling last month. Most estate agents still have less than 40 properties on their books, Rics added.
Neil Foster, a partner at Hadrian Property Partners in Hexham, said: ‘Stock levels show no sign of improvement, but there is a sense that vendor expectations are not being so readily met as in the autumn.
‘That could be a perfect storm if would be sellers are then deterred from proceeding in the traditional spring selling season with ongoing drought for buyers.’
At the end of last month, Nationwide said house prices fell 3.1 per cent in the year to March, representing the biggest annual decline since July 2009.
The decrease, according to Nationwide, took the average property price to £257,122, a fall of £8,190 across the year, as the lender warned it will be ‘hard for the market to regain much momentum’.
While prices may be falling, many would-be buyers are still struggling to get on to the the market, with mortgage rates remaining high and real term pay levels struggling.
Landlord instructions still falling
Landlord woes: The number of new landlord instructions is still falling
While the bulk of Rics’ survey deals with the sales market, it also publishes some very revealing information about the state of the lettings market across the UK.
In its latest findings, Rics said its tenant demand indicator reached a five-month high, with ‘strong demand’ being seen across most of the UK.
Crucially, however, Rics’ landlord instructions metric ‘remains mired in negative territory’. Many would-be landlords are being put off by higher costs, taxes and economic uncertainty.
Rics said: ‘In keeping with this demand/supply imbalance, respondents continue to anticipate rents being squeezed higher, with the net balance for near-term rent expectations rising to +59 per cent from +45 per cent. This is back towards the highs seen in the early part of last year. For the year ahead, contributors are pencilling in roughly 4 per cent growth in rental prices at the national level.’
Spelling more bad news for those renting, all parts of the UK are expected to see an increase in rents during the coming twelve months, Rics said.
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