"A tentative feeling of optimism continues in the property market as recent outlooks point to a revival in 2024."
- Steve Griffiths, chief commercial officer at The Mortgage Lender
The housing market saw another gradual improvement in sentiment during September, likely driven by the continued easing in mortgage rates, according to the latest RICS Residential Survey.
The data show that near-term sales expectations moved a little further into positive territory.
Meanwhile, the tide seems to be turning with respect to house prices, with contributors now envisaging a largely flat trend coming through at the twelve-month time horizon.
Looking at buyer demand, the headline net balance for the new buyer enquiries indicator registered a reading of -3% in December (compared to a figure of -13% in the previous results). This metric has now turned less negative in each of the past four months, with the latest return moving into neutral territory (defined as a net balance reading between +5% and -5%) for the first time since April 2022.
Alongside this, the latest national net balance of -6% for the newly agreed sales measure also represents the least negative figure going back to early 2022.
Looking ahead, near-term sales expectations continue to improve, with the December net balance edging up to +12%, building on a modestly positive reading of +7% beforehand. Respondents now foresee a solid recovery in residential sales volumes emerging over the year ahead, with the latest net balance climbing to +34% (up from +24% last month).
At the same time, the average length of time to complete a sale continues to shorten, with it now taking on average 18 weeks compared to a recent high of 20 weeks back in September.
With respect to supply, a generally stable trend was reported for new instructions over the month, evidenced by a flat net balance reading of +1% being recorded. In keeping with this, the average number of homes currently listed for sale on estate agents book remained at 39 for a second consecutive month, albeit this has risen from 34 properties at the start of 2023. Nevertheless, current stock levels remain relatively low when viewed in a longer term historical comparison (inventory levels have averaged 51 homes per branch over the past fifteen years).
The headline house price gauge posted a net balance reading of -30% in December, which compares with readings of -41% and -60% in November and October respectively. As such, this continues to suggest that the downward pressure on prices is diminishing, with the latest reading the least negative since November 2022. Even so, most regions still exhibit negative readings for this metric at present. Continuing to run counter to the aggregate trend however, respondents in Northern Ireland once again noted an increase in house prices during the latest survey period.
Going forward, near-term price expectations remain marginally negative, albeit the December reading of -13% again points to an anticipated easing in the pace of price declines relative to last month’s net balance of -23%. Significantly, over the year ahead, respondents now foresee house prices stabilising at the national level (posting a net balance of zero vs -10% previously).
The latest feedback on house price expectations remains varied across different parts of the UK, although respondents based in Northern Ireland, the North West of England and Scotland do anticipate prices moving higher on a twelve-month view.
Steve Griffiths, chief commercial officer at The Mortgage Lender, commented: “A tentative feeling of optimism continues in the property market as recent outlooks point to a revival in 2024. December’s report from RICS reflects this renewed confidence as sales expectations continue on their positive track. Buyer enquiries and sales activity are also showing cause for optimism and with house prices now predicted to outpace initial forecasts in 2024, and mortgage rates already coming down, the property market looks set to return to business as normal this year."
Jeremy Leaf, north London estate agent and former RICS residential chairman, said: “Although inflation may have picked up, the downward trend has prompted a reduction in mortgage rates and lender appetite which in turn has helped to increase activity.
"Buyers and sellers are gaining confidence from an expectation that the worst of the market may be behind us, supported by still-strong employment numbers.
"Looking forward, we don’t expect any massive changes but certainly firming prices and more sales agreed than we perhaps dared to expect only a few months ago."
