The feedback to the August RICS Residential Market Survey signals a continued slowdown in sales market activity, with most parts of the UK now seeing a decline in the volume of new buyer enquiries coming through.
Moreover, forward-looking sentiment points to this subdued backdrop remaining in place over the coming months, while the consensus view among respondents for the year ahead has turned largely flat.
Looking at the new buyer enquiries indicator, the August net balance of -17% marks a further deterioration compared to the reading of -7% in July's survey.
As such, this measure suggests the fall in buyer demand gathered impetus over the month, with most parts of the UK now seeing a negative trend emerge.
In parallel to this, agreed sales also appeared to fall at a sharper rate than last month, evidenced by the net balance slipping to -24% from -17%. Looking ahead, sales activity is anticipated to remain broadly flat in the coming three months, with a net balance reading of -2% being registered (marginally weaker than the reading of zero found in the July results).
What’s more, respondents now foresee a largely stagnant picture at the twelve-month time horizon, as the latest net balance for this metric dipped to just +1% from +8% previously, representing the least positive reading since October 2023.
Turning to supply, the new vendor instructions series posted a net balance of -3% in August, indicative of a flatter trend in new listings compared to recent months. In fact, the latest
reading represents the first occasion since June 2024 in which this measure has been below zero (and therefore no longer pointing to some degree of uplift in new instructions). Similarly, the net balance for the market appraisals indicator slipped to -7%, signalling that, on average, respondents are seeing a slightly weaker trend in such activity compared to that experienced twelve months ago.
On the back of the recent weakness in new buyer demand, house prices are reportedly coming under a small degree of downward pressure at the national level. Indeed, the headline house price gauge produced a net balance reading of -19% this month, down from readings of -13% and -7% in each of the two previous monthly reports. Within this, respondents based across East Anglia and the South West of England are citing a more noticeable decline in house prices relative to the national average. To the contrary, survey participants in Northern Ireland continue to report that house prices in their locality remain firmly on an upward trajectory.
Going forward, respondents envisage house prices continuing to edge down at the aggregate level over the coming three months. On a twelve month view, contributors expect house prices to rise marginally, although it is worth noting that the latest net balance of +9% is the least elevated going back to December 2023.
Emma Cox, MD of real estate at Shawbrook, commented: “The property market is continuing to see a lull in activity, with a further drop in house prices in this buyers’ market. This could be due to seasonal circumstances, with holidaymakers potentially yet to return to their home-search, resulting in a second consecutive fall in enquiries. It may also reflect cautious home-buyers, either feeling the pressure of high inflation rates or waiting for clearer guidance from the government on property tax implications.
“We should expect the market to improve gradually, however, rather than overnight. Inflation rose higher than expected over these summer months, raising questions about any further cuts to the interest rate. With the Budget looming ahead, most are employing a ‘wait-and-see’ strategy, which could bring the market to a stand-still, at least until any property tax changes are ruled out. It’s crucial for those looking to buy to speak with a broker and assess the best options available, whether they’re in the beginning stages or further down the road to property ownership."
Jeremy Leaf, north London estate agent and former RICS chairman, added: “Demand is weakening but we have continued to agree sales of houses in particular over the past few weeks during and since the summer holidays. However, quality is trumping quantity in terms of viewing numbers in our offices at the moment.
"On the other hand, flats are proving more challenging to sell mainly due to the amount of choice. Overall, listings are increasing faster than enquiries, making transactions even more protracted and resulting in softening prices.
"Around 25% of our buyers and sellers too seem to have paused since rumours of additional property taxes being introduced in the Budget began circulating."
