The UK housing market remained subdued in July as buyer demand and agreed sales struggled to regain momentum, the latest Royal Institution of Chartered Surveyors (RICS) residential report reveals.
New buyer enquiries recorded a net balance of -28%, unchanged from June but improved from the recent low of -41% in March.
Agreed sales also remained unchanged month-on-month at -30%, although the figure was less negative than the -37% recorded in April.
RICS said geopolitical uncertainty, the domestic political climate and the cost of mortgage finance continued to weigh on confidence.
OUTLOOK BECOMES LESS NEGATIVE
Near-term sales expectations improved for the fourth consecutive survey but remained negative at -14%.
Expectations for sales over the next 12 months moved into positive territory at +3%, their strongest reading since February.
The flow of homes entering the market also stabilised, with new vendor instructions rising from -23% in June to -4% in July. Market appraisals compared with the corresponding period last year registered a balance of +19%.
However, RICS said the pipeline of new listings remained relatively constrained.
The national house price balance improved marginally from -32% to -30%, indicating that price falls remained more widespread than increases.
London, the South East and South West produced weaker readings than the national average, while respondents in Northern Ireland continued to report rising prices. Price momentum in Scotland appeared to be flattening.
MORTGAGE RATES WEIGH ON SENTIMENT
Three-month price expectations remained weak at -31%, while the 12-month outlook stood at +4%.
London recorded particularly low confidence, with year-ahead price expectations falling from -10% to -23%.
RICS chief economist Simon Rubinsohn said: “The housing market remains subdued, and while that is not unusual over the summer months, it is clear from the RICS seasonally adjusted data that the combination of geopolitics, the domestic political climate and the cost of mortgage finance are continuing to weigh on sentiment.”
RENTAL SUPPLY CONTRACTS
Tenant demand was broadly flat during the three months to July, registering -1%, but landlord instructions remained firmly negative at -27%.
Despite softer demand, a net balance of +28% of respondents expected rents to increase over the next three months.
Rubinsohn added that survey responses continued to highlight the effect of regulation on the rental market, with falling landlord instructions pointing to a further reduction in supply.
INDUSTRY REACTION
Tom Bill, head of UK residential research at Knight Frank, said: “The backdrop is less volatile than last summer but upwards pressure on mortgage rates and tax uncertainty are the familiar causes of hesitation among buyers, which means demand is improving but from a low base.
“While the Prime Minister has ruled out a land value tax, the aversion to spending cuts on the backbenches means the government will need to raise a selection of smaller taxes by default and that creates uncertainty.
“Meanwhile, borrowing costs don’t appear to be heading for a meaningful drop as the unpredictable Middle East conflict drags on.”
STAGNANT MARKET
Gareth Lewis, deputy CEO of specialist lender MT Finance, said: “The market is still stagnant with little movement and low transaction volumes.
“With a lack of competitive tension in many transactions, property prices aren’t shifting much either way.
“If you get the right property in the right location then this is not the case, but few meet this criteria.
“The market still badly needs some stimulus and requires more people to transact. Interest rates were expected to fall this year but that outlook has changed with the Bank of England holding base rate for several months. It is not an easy market.”
BURNHAM BOUNCE MISSING
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Although thankfully not as quiet as a few months ago, the market is not seeing signs of a ‘Burnham Bounce’ – yet.
“It may be down to the time of year, but fewer listings mean the relatively low number of proceedable buyers have less choice, which is slowly increasing the pace of decision making.
“However, the market remains price sensitive so generating buyer traction remains challenging, particularly while uncertainty about possible mortgage rate increases continues.”
