The December 2023 RICS UK Residential Survey shows activity picking up, and an improvement on November’s figures as the trend towards lowered mortgage rates continues.
Near-term sales expectations moved up a touch more positively, while the longer-term outlook illustrates a market moving out of negativity and into a flatter environment.
The new buyer enquiries indicator registered a reading of -3% in December, up from the -13% result in November, approaching a flat reading. This is the fourth successive month recording a reduction in negative buyer enquiry activity.
Near-term sales expectations for December increased to 12%, with respondents predicting a solid recovery in residential sales volumes emerging in 2024, with the latest net balance climbing from 24% to 34%.
It also now takes 18 weeks on average to complete a sale, compared to 20 weeks back in September 2023.
The headline house price gauge posted a reading of -30 % in December, compared with readings of -41% and – 60% in November and October, respectively. This result suggests downward pressure on prices is diminishing, with the latest reading its least negative since November 2022.
Tenant demand rose over the month in the lettings market, posting a net balance of +17% of survey participants, although demand growth has dipped noticeably over recent months. Nevertheless, with landlord instructions remaining scarce, having declined continuously over the past year, a lack of properties available on the lettings market continues to underpin rising rental prices.
Consequently, 50% of respondents expect rents to continue to rise over the near term, with longer-term projections now pointing to a nearly 4% increase over the year ahead and for rental growth to average 5% per annum over the next five years.
RICS senior economist, Tarrant Parsons, said: “With 2023 proving to be a particularly challenging year for the UK housing market, it appears recent weeks have seen a little bit of respite emerge.
“Supported by an easing in mortgage interest rates of late, buyer demand has now stabilised, and this is expected to translate into a slight recovery in residential sales volumes over the coming months”.
He added: Nevertheless, the lending climate is set to remain restrictive compared to much of the post global financial crisis era next year, meaning any uplift in activity is likely to be limited for the time being.”
The Mortgage Lender chief commercial officer Steve Griffiths, commented: “A tentative feeling of optimism continues in the property market as recent outlooks point to a revival in 2024.
“December’s report from RICS reflects this renewed confidence as sales expectations continue on their positive track. Buyer enquiries and sales activity are also showing cause for optimism and with house prices now predicted to outpace initial forecasts in 2024, and mortgage rates already coming down, the property market looks set to return to business as normal this year”.
London estate agent and a former RICS residential chairman Jeremy Leaf suggested buyers and sellers are gaining confidence from an expectation that the worst of the market may be behind us, supported by still-strong employment numbers.
“Looking forward, we don’t expect any massive changes but certainly firming prices and more sales agreed than we perhaps dared to expect only a few months ago.”
MT Finance director Tomer Aboody commented that as lenders look to reduce mortgage rates in order to increase lending volumes, buyers are definitely feeling more confident in their ability to buy, both due to affordability but also with the possibility of more stock coming onto the market.