The Royal Institution of Chartered Surveyors (RICS) UK Residential Survey for October 2023 portrays an overall subdued market with house prices continuing to dwindle.
The survey indicator for house prices nationally, in terms of net balance, saw a slightly less negative reading then last time at -63 (-67 in September) suggesting that the pace of decline may be steadying as we come to the end of 2023.
For agreed sales, a net balance of -25 (-35 in September) remains consistent with the overall weak activity levels that have been witnessed throughout October.
Looking ahead to sales expectations in the next few months, a net balance of -20 was posted this time (little changed on -22 in September), with the survey sentiment suggesting there is unlikely to be any significant turnaround in sales through the remainder of 2023. However, the twelve-month sales expectations indicator posted a net balance of 0, signalling a more stable outlook for the sales market over the year to come.
The number of new instructions coming onto the sales market remained in the negative this time around, recording a net balance reading of -7 (-15 in August).
Across the lettings market, a net balance of +33 of survey respondents noted an increase in tenant demand in the three months leading up to October (part of the seasonally adjusted quarterly dataset). Although still positive, this is the most modest reading for tenant demand since Q2 of 2021 (+59).
At the same time, landlord instructions remain in the negative with a quarterly net balance of -18 in Q4 (-28 in July Q3).
Looking ahead, a net balance of +53 of survey participants predict rental prices increasing over the next three months (easing slightly on the record high reading of +61 seen in Q3 2023). Over the next twelve months, rents are projected to rise by around 4% on average across the UK.
RICS Senior Economist, Tarrant Parsons, commented: “Plenty of caution remains evident with respect to both buyer and seller activity across the UK housing market, albeit the latest survey feedback points to a slightly less negative picture than that reported over the previous few months.
“Although base interest rates have now been kept on hold at each of the past two MPC meetings, the Bank of England was keen to emphasise that monetary policy is set to stay at a restrictive setting for quite some time yet. As such, mortgage affordability will remain stretched over the near-term, leaving little prospect of a strong rebound in residential sales volumes, even if expectations have now moved away from cyclical lows.
RICS Senior Public Affairs Officer, Dominic Collier, added: “The King's Speech earlier this week provided a unique opportunity for the government to reaffirm its housing agenda. A focus was placed on addressing challenges related to no-fault evictions for renters and re-possession for landlords. Long-term persistent issues surrounding leases will also be addressed.
“However, many questions and challenges remain. More homes need to be built in the right places, and more of them need to be affordable. Existing homes require more support to improve their energy efficiency, to reduce their bills and help tackle our net-zero targets. We will continue to collaborate with the government in addressing these challenges but also these opportunities”.
