In its latest UK residential market survey, published today (May 11), Rics reports a market continuing to struggle with high borrowing costs and an uncertain economic outlook.
Although new buyer demand was down 37 per cent in April, a further drop from the 30 per cent decrease seen in March, most of the other indicators used in the survey have improved slightly from the lows reached at the tailend of last year.
April saw the least negative sales agreed figure since July 2022 with sales for the month returning a net balance of minus 19 per cent.
This represents a slight improvement on last month’s minus 30 per cent.
Rics noted that the lack of supply of affordable housing for both owners and renters is a key issue hampering the housing market.
Anecdotal evidence collected from agents as part of the survey suggested that buyers are looking for smaller, more affordable homes while people are moving out of older homes to buy more energy efficient new builds.
Rics chief economist, Simon Rubinsohn noted that relatively high borrowing costs, the prospect of a further rate rise and the ongoing affordability challenges are all responsible for the subdued buyer demand seen in April.
“Meanwhile, the imbalance between demand and supply in the letting market still remains stark despite the significant increase in rents,” Rubinsohn added.
The survey results from the rental market showed that tenant demand has increased in the three months to April by 41 per cent.
However, a drop in landlord instructions of 24 per cent was recorded over the same timeframe.
“With demand continuing to outstrip supply, rental prices are anticipated to be driven higher over the next few months,” Rics said.
House prices remain in negative territory according to Rics, with a net balance of minus 39 per cent in April.
However, this is less negative compared to the net balances of minus 43 per cent and minus 47 per cent seen in March and February.
Over the next year, Rics said its price expectations indicator continues to improve from the lows hit during the end of 2022, returning a net balance of minus 16 per cent in April compared to the minus 24 per cent recorded in March.
Knight Frank’s head of UK residential research, Tom Bill expects prices to fall by only a few per cent this year due to the impact of higher mortgage rates.
He added however, that demand will be “supported by a strong jobs market, record levels of housing equity and lockdown savings”.
“Sentiment will be boosted once interest rates have clearly peaked but political uncertainty will rise as the next general election approaches and the property market again becomes a battleground,” Bill said.
Rics senior public affairs officer, Samuel Rees further stressed the issues around housing supply and said Rics is calling on the government to reinstate its housebuilding target which it scrapped last year.
“The removal of the annual 300,000 new homes ambition by the government, along with wider planning, material and labour concerns are adding to the challenges of house building,” Rees said.
"Our data has consistently shown that supply is one of the biggest challenges to housing in the UK, with prices and affordability driven, in part, by the availability of stock.
“Last week’s local election results saw the government face severe defeats, with several senior Conservative politicians calling the government watering down of homebuilding target a mistake and a contributor to their electoral performance,” Rees added.
On the rental market, Rees added that Rics is also worried about the pressures facing it and he noted that Rics has some concerns about the proposed renters reform bill.
"Demand for rental homes remains high, but stock remains low, and landlords are increasingly exiting the market – which is translating into higher rents.
"The government's proposed changes in the renters reform bill, while supporting quality and transparency for tenants, will increase pressure on landlords and may force even more to exit the market,” Rees said.
It was reported last week that the bill was due to be published this week, however it now appears its publication has been delayed.