Sales of homes in the UK strengthened in February, thanks in part to renewed interest from new buyers despite the Bank of England’s decision to increase interest rates – this according to experts responding to the latest RICS Residential Market Survey.
A net balance of +17% of respondents said they had seen a jump in new buyer enquiries – the sixth time in a row an increase has been reported and the strongest it has been over this period. At the same time the number of agreed sales improved, with a net balance of +9% saying sales of homes were increasing and strongest reading since May 2021.
Looking to the next three months, sales are predicted to increase, albeit at a more modest pace – with a net balance of +11% (down from +20% in January). Looking further ahead respondents remained positive with sales expected to remain on a upward trajectory over the coming year.
Declining new sales instructions coming onto the market also appeared to stabilise in February, with only -4% of respondents saying they had seen a fall (less than -7% in January). Stock levels remain close to historic lows however and are still a major factor in sustaining house price inflation.
The pace of house price growth has again accelerated according to respondents. A net balance of +78% said prices had increased on a national level, while Wales, Yorkshire and the Humber, the Northwest of England and Northern Ireland showed especially elevated readings.
Unsurprisingly, respondents said they see national house prices rising further across the next three and twelve months. These expectations climbed slightly higher despite recent rate hikes from the Bank of England. All parts of the country are anticipated to see continued strong growth in house prices over the next twelve months.
On the lettings front, demand from tenants seeking rental housing grew at a solid rate with a net balance of +55% of contributors noting an increase in February. The continuing drought of new homes listed by landlords however showed the supply side remained challenging – with -21% of respondents citing a fall (down further from the -13% in January).
As a result, rental growth expectations continued to be driven higher, reaching +66% nationally – the highest figure on record since December 2012. Twelve-month rental growth projections now stand at 4.5%, while respondents anticipate rents increasing by an average of 5% per annum over the next five years (close to a series high).
Simon Rubinsohn, RICS Chief Economist, said: “Huge clouds of uncertainty hang over the economic prospects as energy prices continue to surge and the Bank of England grapples with how to manage monetary policy in this challenging environment.
“Despite all of this, there is little evidence yet that the mood music regarding the expectations for house prices or rents is shifting. Indeed, the medium-term projections from respondents to the RICS survey are continuing to gain momentum.
“It may well be that these trends ease as the deteriorating macro environment begins to bite but the message that keeps recurring, both for sales and lettings, is there are in aggregate many more prospective purchasers and renters than properties available. The risk is that these imbalances exacerbate the cost-of-living crisis and the challenges particularly for those on lower incomes.”
