RICS Residential Property Monitor - June 2024

Post-election bounce sees UK set for rise in housing market optimism

RICS UK Residential Survey June 2024

• Survey respondents appear a little more confident about an improvement in sales in the wake of the general election and the hope that mortgage rates will soon begin to fall
• However key survey indicators also highlight the risk that this could gradually feed through into higher prices, intensifying some of the ongoing challenges around affordability
• The imbalance in the rental market remains an issue with demand continuing to outstrip supply despite sharp increases in rent in many parts of the country

The latest residential market survey from the Royal Institution of Chartered Surveyors (RICS) continues to highlight a subdued housing market. However, respondent expectations forecast a slightly more promising outlook for sales activity across the UK following the general election and the prospect of a fall in mortgage rates.

Over the next three months, a net balance of +20 of survey respondents anticipate a recovery in residential sales up from +10 in June and the highest level of sales expectations since January 2022. These results indicate that respondents have confidence in the newly elected Labour government who have voiced a strong commitment to boosting the housing market, aiming to deliver 1.5 million homes over the next five years, a figure not hit since the 1960s.

Looking at price expectations over the next twelve months, a net balance of +54 of respondents believe prices will continue to rise, highlighting a key challenge for the new government as boosting housing supply in the UK will not be an easy task. However, any boost to confidence from aspects such as the possibility of lower interest rates should in theory intensify the nation-wide affordability challenge.

Tarrant Parsons, RICS Senior Economist, said: “Although activity across the housing market remained subdued last month, forward looking aspects did improve slightly.

“There are some factors emerging now that could support a recovery in the months ahead. If the Bank of England does decide that the current inflation backdrop is benign enough to start loosening monetary policy next month, this may prompt a further softening in lending rates. In addition, the recent election delivered a clear outcome, with housing pushed up the political agenda.”

Looking across to the rental market, a net balance of +28 of respondents saw a pick-up in tenant demand during June (part of the non-seasonally adjusted data).

Meanwhile, the new landlord instructions net balance slipped from -3 to -11, pointing to a renewed decline in new rental listings. Looking forward a net balance of +38 of respondents anticipate that rental prices will rise over the coming three months. A trend seen since January.