Buyer interest plummets for ‘longest period’ since pandemic: Rics

According to the latest report from the Royal Institution of Chartered Surveyors (Rics), inquiries from new buyers fell for the third consecutive month in July, as the cost of living crisis competed with weak supply in the housing market.

A net balance of -25% of survey participants reported a drop in new inquiries last month compared to -27 in June, “which is the longest period of decline in buyer demand since the early stages of the pandemic, and is evident across the UK,” said the body’s July RICS residential market survey.

He adds that agreed sales were also down slightly, with the latest net remaining slightly negative at -13%, compared to a reading of -14% previously.

The survey says: “Higher interest rates and the cost of living crisis are cited by contributors as driving the decline in market activity, although it is important to note that the survey sample was mostly gathered before the last 50 basis point rate hike by the Bank of England.”

But he adds that “the lack of supply remains a crucial factor in supporting the continued growth of house prices”.

Looking ahead, the report said the sales forecast over the next three months fell to -20% in July from -11% the previous month. Year-over-year, the net sales expectation balance fell to -36% among respondents, compared to -21% last time, which is “the most pessimistic figure since March 2020”.

In the rental market, tenant demand continues to increase, with a net balance of +36% of respondents reporting an increase. However, a net balance of -8% of participants noted a drop in new instructions from owners. The report says rents are set to continue rising sharply in the near term with a net balance of +57%, with all areas of the UK expected to experience further recovery.

The report comes amid growing concerns over the cost of living crisis, which last week saw the Bank of England raise interest rates by 50 basis points, taking interest rates to 1.75 %, the largest increase in 27 years. Inflation stood at 9.4% in June, a new high for 40 years.

Earlier this month, annual house price growth in the UK slowed to 11.8% in July, taking the average house price to £293,221, according to the latest House Price Index from Halifax, while transaction prices fell for the first time in 13 months.

Rics Senior Economist Tarrant Parsons says: “Amid a steep rise in the cost of living, slowing economic growth and rising interest rates, it is no surprise that activity in the housing market is currently losing momentum. .

While monetary policy is expected to tighten further in the coming months, selling expectations point to a further slowdown in trading volumes going forward.

Nevertheless, when it comes to housing prices, the limited supply available is still seen as a crucial factor supporting the market. Although house price growth is likely to continue to slow, respondents still expect prices to be slightly higher than current levels a year from now.

Hargreaves Lansdown Senior Personal Finance Analyst Sarah Coles adds: “Bidding wars are increasingly giving way to cheekier offers, particularly on more expensive properties. Half of agents say properties under £500,000 no longer sell above price asked, while those priced above £1million are forced to accept lower offers, another sign that the property market is starting to turn.

Sales are also down and agents expect them to continue to decline in the coming months. Meanwhile, after such a long period of ever-increasing numbers of buyers, we have seen a second month where fewer buyers are looking for a home. Home prices continue to rise as buyers still significantly outpace sellers, but they are starting to cool off a bit.

Many agents are feeling the impact of a drop in demand. Others point out that even when people decide to buy, life continues to get harder, so more and more sales plummet as they worry about job security and price increase. Some agents say the agreed prices are being renegotiated.

However, it’s still a very mixed picture, with some agents saying it’s as busy as ever, and some buyers are in a rush to grab a property before mortgages get even more expensive.

The rental market remains horrible. The number of tenants is again on the rise, including first-time buyers who are worried about the cost of living and have decided to re-let instead.

Meanwhile, the number of owners fell for the third month in a row. Some warn that the legislative changes are driving more homeowners out of the market, so that no one fills the void, shortages get even worse. That means agents don’t expect any slowdown in rent growth.

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