"The new government’s focus on boosting housing development alongside the recent quarter point base rate cut does appear to have shifted the mood music in the sales market"
- RICS chief economist, Simon Rubinsohn
The UK's residential property sector brightened slightly in July, with mortgage rates falling as the market correctly anticipated a rate cut by the Bank of England, the latest RICS survey shows.
This has improved positivity in the sector, but RICS says the full impact of the Central Bank cut and the UK Government's announcements on housing reform will not be evident until next month's report.
New buyer enquiries picked up a little in July, with more buyers looking to buy a home - a result of +2%, up from -6% last month. Whilst still broadly flat, also it is the first time in four months that there have been positive numbers of buyers looking to enter the market.
The number of agreed sales also saw an improvement. Whilst this month's -2% (net balance) result is still inside negative territory, it's a clear improvement and continues the positive trajectory since it scored -13% and -6% in May and June, respectively. Looking at the sales numbers over the next three months, a net balance of +30% of respondents predict sales rising over the next three months, which is the most positive sentiment since January 2020. The 12 month outlook is also more optimistic, with +45% of respondents expecting sales increases in twelve months, up from +40%.
Looking to house prices, the figures suggest they were still decreasing at the UK-wide level. The overall figure, which captures and combines all UK regional data, reported a -19% (net balance) result. All English regions exhibited negative sentiment towards prices, with East Anglia and Yorkshire & the Humber exhibiting the weakest readings. However, Scotland and Northern Ireland saw prices rising. Looking ahead, +46% (net balance) of respondents expect prices to be higher in a year's time.
RICS chief economist, Simon Rubinsohn, said: “The new government’s focus on boosting housing development alongside the recent quarter point base rate cut does appear to have shifted the mood music in the sales market, with projections for both near and medium activity picking up according to the latest RICS Residential Market Survey. Inevitably, significant challenges lie ahead in delivering on the ambitions around planning reform and it is far from clear that the Bank of England will follow the August move with further easing over the coming months, but, even so, the policy mix is becoming more supportive for the sector."
Tomer Aboody, director of MT Finance, commented: “A definite shift in positivity over the past month is evident due to the expected (now a reality) interest rate reduction, along with cheaper mortgage rates.
“While transaction volumes are still low, hopefully a further reduction in mortgage rates can boost these and increase volumes.
“Further homes are definitely needed and assistance for buy-to-let landlords should also be a focus, as demand for rental property is outstripping supply, pushing up rents. We wait to see if the Chancellor has some positive news for the property market in her October Budget.”
Jeremy Leaf, north London estate agent and former RICS residential chairman, added: “We have noticed more optimism about prospects for the housing market now that election uncertainties are behind us and mortgage rates seem to be heading south.
“However, with so many buyers and sellers on holiday, demand and the pace of transactions has only picked up a little and we expect a stronger bounce-back in September."
