The latest RICS residential survey for July saw the housing market retreat slightly as previous signs of recovery became uncertain.
Tentative signs of recovery that emerged in previous monthly feedback were partially reversed, with measures of demand and agreed sales slipping back into slightly negative territory. Meanwhile, forward-looking sentiment now points to a largely flat picture for activity in the near-term.
New buyer enquiries reported a net balance of -6% in July, down from +4% in June - implying a slight softening in demand compared to the prior survey period. That said, there appears to be increasingly variable results across different parts of the country, with relatively weaker demand trends reported in East Anglia, the South East and the South West of England.
With respect to agreed sales, a headline net balance of -16% was posted in July, marking a renewed deterioration compared to the reading of -4% registered in June. Going forward, respondents envisage a generally flat near-term sales outlook, evidenced by a net balance reading of just +1% being returned (versus +7% previously). At the twelve-month time horizon, sentiment is a little more positive, with a net balance of +8% of contributors anticipating a pick-up in sales activity.
Looking at changes in supply, a net balance of +9% of respondents cited an increase in the flow of new listings coming onto the market, albeit this latest reading is consistent with only marginal growth.
Turning to house prices, at the national level, a net balance of -13% was recorded for the survey’s headline gauge of price growth. As such, this signals a small downward adjustment in average house prices across the country, with the latest feedback weakening slightly from readings of -7% returned in each of the previous two monthly reports.
Going against the broader trend however, prices continue to rise in Northern Ireland and Scotland, while respondents based in the North West of England are also seeing prices move higher. Conversely, prices are reportedly falling at a more significant rate than the national average across East Anglia.
RICS chief economist, Simon Rubinsohn, said: “The somewhat flatter tone to the feedback to the July RICS Residential Survey highlights ongoing challenges facing the housing market. Although interest rates were lowered at the latest Bank of England meeting, the split vote has raised doubts about both the timing and extent of further reductions. Meanwhile, uncertainty about the potential contents of the Chancellor’s autumn budget is also raising some concerns. Against this backdrop, respondents continue to report that the market remains particularly price sensitive at the present time.“
Emma Cox, MD of real estate at Shawbrook, commented: “Economic uncertainty and a lack of incentives for first-time buyers has contributed to a slight dip in activity. Prospective buyers should be relieved that the Bank of England’s decision to cut the base rate should keep mortgage rates stable and provide added impetus in the market.
“As a result, many have been driven to the rental market, which - despite heightened demand - is still experiencing a lack of quality supply and is struggling to keep pace with the influx of new tenants. Professional landlords should see this as an opportunity to capitalise and expand their portfolios - with more competitive buy-to-let mortgage rates providing a potential catalyst.”
Tomer Aboody, director of MT Finance, added: “Lower mortgage rates have helped fuel confidence among those looking to take a step onto, or move up, the housing ladder. However, further rate cuts are needed to encourage further activity. Transaction numbers are lower than in previous years as a result of higher stamp duty and taxes imposed by the Chancellor in her last budget.
“Sales numbers need to improve as this will benefit the wider economy, not just the housing market. Some encouragement is required via a reform in stamp duty to encourage those moving up the ladder, as well as those downsizing, to take the plunge."
