Positive Trends in UK Housing Market Despite Lingering Caution

The latest data from the February 2024 RICS UK Residential Survey paints a more optimistic picture for both buyers and sellers, indicating a potential shift in momentum within the housing market after a period of uncertainty.

Throughout much of last year, the housing market saw cautious activity from both buyers and sellers, primarily due to uncertainties surrounding mortgage rates and interest rate reductions. However, the recent survey suggests a more upbeat sentiment prevailing in the market.

At a national level, new buyer enquiries have remained positive for the second consecutive month, indicating a sustained increase in buyer demand. Moreover, most regions across the UK have witnessed a recovery in buyer interest over the past two months. Although agreed sales were flat in February, the figures still suggest a stronger trend compared to the previous 12 months, reflecting a shift towards increased sales activity. Looking ahead, sales expectations for the near term are positive, with respondents anticipating further momentum in sales activity over the coming year.

One significant highlight from the February survey is the substantial rise in new instructions to sell, marking the strongest reading since October 2020. This surge in instructions contrasts with the negative trend observed throughout 2023 and indicates growing confidence among sellers. Additionally, average stock levels on estate agents’ books have reached their highest since February 2021, with an increase in market appraisals noted compared to the same period last year.

Despite these positive indicators, house prices in the UK continue to show a downward trend, albeit at a stabilising rate. However, there is optimism for a turnaround, especially in London, where a notable proportion of respondents foresee house prices returning to growth within the next twelve months. In the lettings market, tenant demand continues to rise, albeit at a slower pace, while landlord instructions remain scarce. Consequently, rents are expected to increase over the coming months, although at a moderated rate compared to previous periods. Commenting on the survey findings, RICS chief economist Simon Rubinsohn highlighted the encouraging signs in the sales market, emphasizing the
sustained positivity in buyer interest and the increase in new instructions to agents. He also noted the critical role of sustained stock increase in
shaping the market’s trajectory, particularly amidst constraints in new build developments.
Former RICS residential chairman Jeremy Leaf echoed the sentiments, suggesting a pattern of fluctuating trends in the housing market over the next few months. He observed hesitancy among buyers and sellers leading up to the Budget, with expectations for incentives
to stimulate market activity. However, the Budget’s outcome fell short of these expectations, indicating a reliance on growing market optimism rather than government intervention.

In conclusion, while uncertainties persist, the February RICS survey offers grounds for cautious optimism in the UK housing market. With positive indicators in buyer demand, sales activity, and new instructions to sell, coupled with moderating trends in rental markets, the housing sector appears poised for gradual recovery and stability in the months ahead.