The UK residential sales market showed little sign of recovery in July, with the latest RICS survey revealing that buyer enquiries and agreed sales remained firmly in negative territory for the second consecutive month.
New buyer enquiries posted a net balance of -28% in July, matching the June reading. The figure is well below neutral but marks a recovery from the survey low of -41% recorded in March, suggesting the rate of deterioration has eased in recent months rather than reversed.
Agreed sales held at a net balance of -30%, also unchanged from the previous month. April's reading of -37% now stands as the recent low point, and while the direction of travel has modestly improved since then, RICS notes the backdrop remains challenging, and market momentum is generally muted.
Short-term sales expectations have edged in a more positive direction over four consecutive survey reports, reaching a net balance of -14% in July. The twelve-month outlook stands at +3%, its most positive reading since February, though this falls some way short of signalling a meaningful turnaround.
New instructions data offered a mixed picture. The net balance for new listings flattened to -4% from -23% in the prior survey, while the market appraisals measure returned a net balance of +19% against the same period last year. Together, RICS says these figures suggest the near-term pipeline of sales listings remains relatively tight.
House prices
House prices continued to face downward pressure nationally, with the headline price gauge registering a net balance of -30% in July, a marginal improvement from -32% in June and slightly further from the recent trough of -35% in April. Regional variation remains pronounced. London, the South West, and the South East recorded more negative readings than the national average, while Northern Ireland continues to report rising prices. Scotland, which had maintained an upward trend for an extended period, now appears to be levelling off.
Forward-looking price sentiment is cautious across most timeframes. The three-month house price expectations measure stands at -31%, and the twelve-month reading has eased to +4% from +8% previously. London's year-ahead outlook has deteriorated notably, with its net balance falling to -23% from -10% in the prior survey.
Lettings
In the lettings market, tenant demand was broadly flat in the three months to July, recording a net balance of -1%, down from +12% in the previous quarterly reading. Landlord instructions remain in negative territory at -27%, consistent with an ongoing pattern of some landlords reducing or exiting their portfolios. Near-term rental price growth expectations held relatively stable, posting a net balance of +28%, little changed from +25% and +29% in the two prior periods, and continuing to point to upward pressure on rents.
Industry reaction
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “A significant area of change in July was the uplift in the supply of homes, with new instructions, albeit still in negative territory, recorded as a net balance of -4%, from -23% the prior month. This is a notable difference, showing some sellers felt more confident to put their property on the market; however, sales listings are expected to remain tight in the near term. This could escalate into a wider problem in the months ahead, where demand outstrips supply.
“New buyer enquiries remain weak, only slightly improving in July from the lows recorded over recent months. This shows the wider issues at play for the housing market, as even with a seasonal summer slowdown, many buyers could be worried about making a large financial commitment right now or feel they need to delay their plans due to mortgage rate volatility. The Moneyfacts Average New Mortgage Rate rose by 0.12%, from 5.47% at the start of July to 5.59% at the start of August, reversing the prior monthly cut.
She added, “Stagnation appears to be a running theme in the rental market for new landlord instructions, likely hit by some choosing to leave the sector or reducing their portfolios as a result of wider Government tax and regulation changes over recent years. Alongside concerns over a shortage in good-quality rental stock, rents are expected to rise over the next three months, according to RICS. It seems for now, demand could outstrip supply in the private rental market over the coming months, despite a seasonal slowdown over the summer, so prospective tenants must act quickly to find an affordable property.”
Tom Bill, head of UK residential research at Knight Frank, noted: “The backdrop is less volatile than last summer but upward pressure on mortgage rates and tax uncertainty are the familiar causes of hesitation among buyers, which means demand is improving but from a low base. While the Prime Minister has ruled out a land value tax, the aversion to spending cuts on the backbenches means the government will need to raise a selection of smaller taxes by default, and that creates uncertainty. Meanwhile, borrowing costs don’t appear to be heading for a meaningful drop as the unpredictable Middle East conflict drags on.”
Gareth Lewis, deputy CEO of specialist lender MT Finance, said: “The market is still stagnant with little movement and low transaction volumes. With a lack of competitive tension in many transactions, property prices aren’t shifting much either way. If you get the right property in the right location, then this is not the case, but few meet these criteria.
“The market still badly needs some stimulus and requires more people to transact. Interest rates were expected to fall this year, but that outlook has changed with the Bank of England holding the base rate for several months. It is not an easy market.”
