"The increase in the cost of mortgage finance alongside growing concerns about the economic outlook is unsurprisingly having an impact, albeit a relatively modest one at this point"
Respondents reported that new buyer enquiries had fallen in May, with a net balance of -7%, down from much more positive sentiment in April (net balance +8%). Some respondents put this down to some buyers tightening their belts as the cost of living begins to have an effect, and May’s result brings to an end eight consecutive positive results for new buyer enquiries.
As such, the volume of agreed sales saw little change, with a flat picture reported. Sales expectations over the next three months are also predicted to be flat, from a rosier picture in April. Looking over the next twelve months, expectations are that sales are set to decline with a net balance of -24% respondents commenting that they foresaw sales declining.
New instructions to sell homes were also largely flat during May, and there seems to be little respite for lack of supply in the future, with respondents citing the weakest picture since December 2021 for new/requested market appraisals. This suggests there is little prospect of more homes coming onto the market in the immediate future.
Given constrained supply, house prices continue to rise. A net balance of +73% of contributors reported an increase in house price during May. Broken down, all parts of the UK continue to see increasing prices, with growth exceptionally strong in Northern Ireland, Northern England and Wales.
Looking ahead, twelve-month price expectations did ease at the UK level for a third successive month. Although a net balance of +42% of survey participants still envisage house prices being higher in a year’s time, this is down from +78% in February and is the most moderate reading seen since January 2021. However, twelve-month price expectations remain positive across all parts of the UK at this stage.
Simon Rubinsohn, RICS chief economist, said: “The increase in the cost of mortgage finance alongside growing concerns about the economic outlook is unsurprisingly having an impact, albeit a relatively modest one at this point, on buyer activity in the sales market.
“Despite this, prices are viewed as likely to remain resilient into 2023. But as is often the case in these circumstances, the pressure is likely to felt more visibly in transaction levels which are seen as likely to slow as the year wears on.”
“Meanwhile, what is particularly striking in the latest RICS survey is both the current and anticipated strength in the rental market. New instructions of property to let continue to fall according to respondents to the survey while demand is still very strong leading to rental levels being bid higher and greater challenges for tenants who aren’t in the position to compete for the available stock.”
Emma Cox, MD of real estate at Shawbrook, said: "It seems likely there will be a further cooling of the strongest property price and transaction growth as the market faces sustained economic headwinds.
"However, any slowdown will still leave the market in historically robust territory. Estate agents’ stock levels remain low, and many buyers are still determined to move ahead with their purchases.
“With so many complex factors weighing on the sector, lenders are continuing to support homebuyers and landlords with competitive rates and favourable LTVs. Many are looking to secure mortgage deals now, in anticipation of future Bank of England decisions.
“Supply remains one of the key themes highlighted by surveyors. Further clarity is needed from the government on how it intends to support landlords and homeowners, and particularly those looking to make energy efficiency upgrades to older stock.”
