UK surveyors reported an increase in new buyer enquiries and agreed sales in May, according to the latest data from the Royal Institution of Chartered Surveyors (Rics).
Although these figures still remained in negative territory, they were the “least pessimistic” scores posted for 12 months, according to Rics. However despite this improved picture, Rics said that “stubborn” inflation, expectations of further rate rises and house prices falls would dampen these more positive trends, and in all likelihood “introduce renewed downward pressure on the market in the months ahead”.
Looking at demand, Rics figures show the net headline balance for new buyer enquiries in May was -18%. Although this indicates a subdued trend, Rics points out this is an increase on the -34% figure posted in April, and represents the‘least negative figure over the past twelve months.
It says this trend is consistent across the country, with a less downbeat pessimistic trend for new buyers reported in every region when compared to January figures.
It is a similar picture with agreed sales, with Rics figure for May showing a a net balance of -7%, noticeably less downbeat than the figures of -29% and -18% reported in March and April.
The latest net balance for near-term sales expectations was recorded at -7%, an improvement on the -17% posted in April and the highest figure since May 2022. At the twelve-month time horizon, the sales expectations net balance stands at +2%, virtually unchanged from the 3% last month and consistent with a generally steady sales outlook.
Looking at projections for house prices, a net balance of -30% of surveyors were expecting further house price falls in May. Again, while the consensus is that prices will slip further, this measure has turned less negative in each of the past three reports, having hit a low of -46% in February.
Rics says that within this metric the disaggregated data is showing some noteworthy variations in house price trends across different parts of the UK. In London, for instance, the latest net balance of -3% indicates a mostly steady picture, up from readings of -42% and -11% in March and April.
Rics says that while many metrics clearly indicate some improvement in market conditions, recent disappointing inflation figures will likely lead to the Bank of England taking further action, with further interest rate rises expected to stifle the market.
In the lettings sector, demand still outstrips supply, with further pressures placed on availability as interest rate rises and proposals to abolish Section 21, among other changes contained in the UK Government’s Renters (Reform) Bill, are encouraging landlords to sell up.
Rics senior economist, Tarrant Parsons says: “The latest survey indicates a modest recovery in the sales market activity during May, with generally less negativity compared to the end of 2022.
“However, it seems storm clouds are gathered, with the UK’s stubbornly high inflation likely undermining the recent improvement in activity by prompting the Bank of England to take further action through interest rate rises, leading to higher mortgage rates and ultimately reducing affordability and buyer demand.
“The banking sector appears to expect this with many banks and building societies already introducing products with higher interest rates.”
