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It shows that measures of demand and agreed sales have slipped back into slightly negative territory, as well as the weakest figures for landlord instructions in over five years. Overall, forward-looking sentiment now points to a largely flat picture for activity in the near-term.
New Buyer Enquiries reported a net balance of -6% in July, down from +4% in June. While this indicates a slight softening in demand nationally, compared to the prior survey period, regional results are variable, with relatively weaker demand trends reported in East Anglia, the South East and the South West of England.
In respect of agreed sales, a headline net balance of -16% was posted in July, marking a strong deterioration compared to the reading of -4% registered in June. Respondents envisage a generally flat near-term sales outlook, the report says, evidenced by a net balance reading of just +1% being returned (versus +7% previously).
At the 12-month time horizon, sentiment is a little more positive, with a net balance of +8% of contributors anticipating a pick-up in sales activity. In terms of supply, a net balance of +9% of respondents cited an increase in the flow of new listings coming onto the market,
With house prices, at the national level, a net balance of -13% was recorded for the survey’s headline gauge of price growth, compared to readings of -7% returned in each of the previous two monthly reports, signalling a small downward adjustment in average house prices.
There are regional differences, however, with continuing price rises in Northern Ireland, Scotland and the North West of England. Conversely, prices across East Anglia are reportedly falling at a more significant rate than the national average.
In the lettings market, tenant demand held steady in the three months to July, recording a net balance +4% (though notable less than the +14% in the previous quarter). Alongside this, the report says the net balance of -31% for landlord instructions – the act of a landlord making their property available for rent – is the weakest since April 2020.
As a consequence of the supply shortage, rental prices are anticipated to continue to rise over the next three months by a net balance of +25% of survey participants.
RICS chief economist, Simon Rubinsohn, said: “The somewhat flatter tone to the feedback to the July RICS Residential Survey highlights ongoing challenges facing the housing market. Although interest rates were lowered at the latest Bank of England meeting, the split vote has raised doubts about both the timing and extent of further reductions.
“Meanwhile, uncertainty about the potential contents of the Chancellor’s autumn budget is also raising some concerns. Against this backdrop, respondents continue to report that the market remains particularly price sensitive at the present time.”
Tom Bill, head of UK residential research at Knight Frank: “The housing market is hitting a series of hurdles this year. April’s stamp duty cliff edge was the first and now buyers and sellers are increasingly unsettled by a re-run of last year’s game of ‘guess the autumn tax rise’. We had an interest rate cut this month but it was priced in and the wider economic mood remains fragile. Supply still notably outstrips demand, which is also keeping a lid on prices.”
“[Rental] supply is shrinking as more landlords explore a sale due to tax and regulatory changes in the lettings sector. It is one unintended consequence of the forthcoming Renters Rights Bill, which could make it more onerous to regain possession of a property and raises the risk of void periods. As a result, we have seen renewed upwards pressure on rental values in recent months, which will be unwelcome news for tenants.”
David Smith, property litigation partner at London law firm Spector Constant & Williams: “This is entirely unsurprising given the ongoing level of uncertainty in the sector. Landlords have been slowly exiting the sector since 2019, the pace is increasing due to the effects of the Renters’ Rights Bill and the unwillingness of the government to listen to reasonable alterations to their bill, the ongoing failure to make real improvements in the court system, and the increasing weight of regulation on smaller landlords. Coupled with concerns over the future financial position for landlords it is hardly surprising that there is little appetite to enter the sector and increased departure.
“However, the government is in the position of being able to make measurable improvements very quickly. It could accept House of Lords amendments to the Renters’ Rights Bill, be clearer about its future tax plans, and work more closely with the sector to make it a more attractive investment proposition.”
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