Sales and house prices continue to decline across the residential market in January

• Buyer enquiries, agreed sales and new instructions remain on a downward trend
  
• Tenant demand sees an increase at the same time as landlord instructions fall
  
• House prices decline further in all regions with the sharpest decline found in the East Midlands and South East

The January 2023 RICS UK Residential Survey results continue to highlight a muted market, with new buyer demand, sales, fresh listings, and prices all reported to be on a downward trend.

Near-term expectations suggest this picture is likely to remain in place for a while longer as the market adjusts to a higher interest rates in the UK.

At a national level, the latest net balance for new buyer enquiries slipped to -47%, down from a reading of -40% last month. This continues to signal a decline in demand, with the January return marking the ninth successive negative monthly reading for new buyer enquiries.

Respondents to the survey in all parts of the UK saw either a fall in demand or a stagnant trend over this latest survey period.

Alongside this, respondents continue to see a pull-back in the volume of fresh listings coming onto the sales market, with a net balance of -14% of contributors reporting a decline in new instructions over January.

Looking at the next twelve months, the sales outlook does not appear to be quite as downcast as before, with the net balance moving to -20% compared to a much weaker reading of -42%
seen  in December.

The latest feedback on national house prices points to another monthly decline, with the January net balance softening further to -47% compared to a reading of-42% beforehand.

All regions of England are seeing house prices retreat at present, with the sharpest declines (in net balance terms) coming across the East Midlands and the South East.

Looking across to the lettings market, tenant demand continues to increase according to a net balance of +43% of respondents nationally. At the same time, landlord instructions fell once again, with the latest net balance reading of -14% representing the tenth straight quarter in which a decline has been reported.

On the issue of supply across the rental market, around 64% of survey participants are of the opinion that Build to Rent will play a bigger role in the product mix brought to market going forward.

That said, the largest share of respondents (48%) perceive that Build to Rent will only be somewhat successful in filling the supply shortfall in the market longer term.

Simon Rubinsohn, Chief Economist at RICS, said: “Although some respondents to the January RICS survey have noted a little more interest in the housing market as the new year got underway, the overall tone of the feedback still remains subdued which is not altogether surprising given the jump in mortgage rates since the autumn.

“Prices, meanwhile, are now beginning to reflect the shift in balance between demand and supply.

“However, it is questionable how much downside to pricing there is likely to be given that recent macro forecasts from the Bank of England and others are now envisaging a less harsh economic environment this year.

“Meanwhile the rental market continues to show strong interest from tenants and limited stock available which is keeping a firm momentum to rental growth. While Build to Rent clearly has role to play in helping to fill this gap, the insights from the latest survey suggest that this is not going to sufficient, at least in the near term, to address the challenge in this market”.

-ENDS-

Notes for editors:

Commentary from survey respondents regionally can be found in the economic pdf on the back pages – you are free to use these.

The RICS Residential Market Survey is released on the second Thursday of every month apart from January.

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