The latest monthly data from the Royal Institution of Chartered Surveyors rolls back on previously upbeat projections for the housing market in the coming months, as rising interest rates dampen recent gains.
The data for May, released today (June 8), reveals some positive trends in the home buying market, but Rics have said renewed downward pressure is likely in the months ahead.
New buyer enquiries and agreed sales metrics in May saw the least negative readings in twelve months, with the net headline balance for new buyer enquiries minus 18 per cent in May.
While this reflects a subdued trend in buyer demand, it is up from a net balance of minus 34 per cent in April.
The agreed sales indicator returned a net balance of minus 7 per cent this month, an improvement on the minus 29 per cent and minus 18 per cent seen in March and April respectively.
However despite these modest improvements, Tarrant Parsons, senior economist at Rics, noted that “storm clouds are gathering”.
He attributed this to the UK’s stubbornly high inflation which has led to further base rate rises from the Bank of England.
Ultimately, this leads to higher mortgage rates and reduced affordability and buyer demand, Parsons explained.
“The banking sector appears to expect this with many banks and building societies already introducing products with higher interest rates,” he said.
Parsons also raised concerns about the health of the buy-to-let sector.
“Interest rate rises are also impacting the rental sector and combined with looming reforms proposed in the government’s renters reform bill, landlords are increasingly deciding to leave the sector and sell up property, causing further constraints to lettings supply,” he said.
The long awaited renters’ reform bill, which will ban ‘no fault’ evictions, was introduced to parliament after multiple delays in May.
jane.matthews@ft.com
