Rates Ease, Keys, Please: UK Housing Market shows promise moving into Q4

RICS UK Residential Survey August 2024

• New buyer demand has risen over the last month
• Sales improve, with further increases expected in the near future
• The struggle between healthy tenant demand and a lack of available rental properties persists

The latest RICS Residential Survey for August 2024 reports a positive shift in the UK housing market, spurred on by the recent decrease in mortgage interest rates. Buyer demand and sales activity are on the rise, with industry professionals anticipating further growth as we move into the final quarter of the year.

August’s survey results shows a rise in the number of people looking to buy homes, with a net balance of +15 of respondents noticing an improvement in this survey indicator (+4 in July).

House prices are starting to increase after almost two years of decline with August’s survey showing that prices have moved into positive territory for the first time since October 2022, with a net balance of +1 and with +14 of respondents predicting a steady rise over the next three months.

On the supply side, the number of new property listings has seen a modest increase (+7 up from +3 in July), with reports on the volume of appraisals taking place suggesting this will continue to increase, improving the choice for new buyers.

In the rental market, tenant demand continues to remain positive, although the pace of growth has slowed compared to previous months. The net balance of +11 in August is lower than the +26 recorded in July, but still reflects steady interest from renters. On the other side, the supply of rental properties remains sluggish, with new landlord instructions falling again. The net balance for new rental listings dropped to -21, down from -9 last month.

This ongoing shortage of rental properties is expected to keep pushing rents higher. Near-term rental price expectations also remain heightened, with a net balance of +39 of survey respondents predicting that rents will increase in the coming months.

RICS Chief Economist, Simon Rubinsohn, commented:

“The latest RICS survey captures an improvement in sentiment over the past month in the wake of the modest decline in mortgage rates with buyer interest improving, albeit from a relatively low base, and stock levels edging up.

“However, anecdotal remarks from respondents still demonstrate the need for realistic pricing to get deals done with uncertainty both around the scope for further interest rate cuts and the likely contents of the forthcoming Budget keeping the mood in check.

“Affordability remains an issue in the sales market even with somewhat cheaper finance now available but the picture appears even more acute in the lettings market where the amount of rental stock continues to diminish. Contributors continue to point to landlords looking to scale back their portfolios which will inevitably increase the imbalance that already exists in the market”.