Increased stability in the housing market

Anyone who has been watching the state of the UK housing market in recent months might have had reason to think that it is still in the doldrums, with reports of depressed prices being in favour with news outlets.

It's true that the housing market has been obstinately sluggish as a result of the financial pressures applied through the cost-of-living crisis (or affordability crisis, as it is euphemistically being renamed), coupled with the pressures on fuel prices from international wars and the knock-on effect to disposable income with the impact on living expenses.

With the decreasing availability of cash, it is hardly surprising that many people are deciding to hold off on major purchases such as looking for their next property (unless there are pressing reasons for going ahead with it, of course).

Each month, the Royal Institution of Chartered Surveyors (RICS) carries out a survey of property professionals to gauge the current expectation in their Residential Market Survey.

The latest report has just been published (10 September), and shows that there is an easing in the expectations of buyer demand and agreed sales that have been a feature for most of this year.

The net balance of buyer enquiries rose to -19%, which, while still negative, is the least it has been since January, the fifth consecutive monthly improvement, giving an encouraging overall view that the housing market woes are gradually easing.

RICS also notes that the expectations for sales over the next three months have also moved towards more neutral territory: registering a net balance of -3%, which is a significant improvement on July's figure of -13%. Further, the respondents indicated that they expect substantial improvements to continue over the next twelve months.

The regional differences still persist, with London showing a more negative price balance than the headline average, although that figure, too, was an improvement on July's figure. Regions in the north are showing a greater general improvement.

However, there is still a downward pressure being felt on house prices and, although there is some improvement noted in the last three months, the expectation remains that further house price drops will occur in the next few months as a way to generate greater interest and potential sales from potential buyers.

For the lettings market, rising tenant demand and constrained supply of rental opportunities have applied an upward force on rent prices, with an expected rise of 3% over the next twelve months.

RICS Head of Market Research and Analysis, Tarrant Parsons, said of the findings:

"August's results show a market that is gradually finding its footing, with key activity indicators having become progressively less negative over recent months.

That said, any potential recovery remains fragile and faces two significant near-term tests.

The Bank of England's increasingly hawkish tone, on the back of renewed volatility in global energy markets, is a reminder that the borrowing cost outlook could yet deteriorate further.

And with the October Budget approaching, speculation over potential changes to property taxation is adding another source of caution for both buyers and sellers.

As such, headwinds over the shorter term remain pronounced, even though recent market trends have appeared more stable."

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