The UK housing market continues
to weaken, with last month bringing another decrease in buyer demand and agreed
sales, alongside a halt in house price growth, according to the October 2022
RICS Residential Market Survey.
New buyer enquiries fell for a
sixth successive month in the sales market, as the latest headline net balance
weakened further to -55% in October (from -36% last time).
Moreover, the survey feedback
on buyer demand is negative across all parts of the UK, the second report
running where this has been the case.
In keeping with the general
pattern of a weakening market, the average time to complete a sale from its
initial listing has edged upwards, now taking close to 18 weeks. At this point
last year, the average completion time was closer to 16 weeks.
Concerning house prices, the
latest results show a considerable slowing in momentum. The national net
balance for house prices moderated to -2% in October, down from a figure of
+30% previously. As such, this ends a sequence of 28 positive monthly readings,
with the latest result indicating house price growth grinding to a halt. There
are regional differences in house prices, with respondents in areas such as
East Anglia and the South East of England reporting some pull-back in prices
(posting net balances of -31% and -16% respectively). Conversely, respondents
based in Northern Ireland and Scotland continue to report that a reasonably
firm upward trend in house prices is remaining in place, even if the pace of
growth is softer than earlier in the year.
Looking ahead, the net balance
for the twelve-month price expectations series sank to -42% in the latest
findings, falling from a reading of -18% last time. When viewed at the
regional/country level, respondents across all parts of the UK are now (on
balance) of the opinion that prices will see some degree of decline over the
year ahead.
In the lettings market, tenant
demand continues to rise at a solid pace, with a net balance of +46% of survey
participants noting an increase in October (part of the seasonally adjusted
quarterly lettings dataset). At the same time, landlord instructions fell once
again according to a net balance of -14% of respondents at the headline level.
Given this mismatch, rents are expected to be driven higher over the near-term,
returning a net balance reading of +52. At the twelve-month time horizon,
respondents envisage rents picking up by around 4% nationally.
Simon
Rubinsohn, Chief Economist, commented: “The latest feedback to the RICS survey
provides further evidence of buyer caution in the face of the sharp rise in
mortgage costs. As a result, the volume of activity is likely to slip back over
the coming months and realistic pricing is now much more important to complete
a sale. The settling down in financial markets could provide some relief
although it may be premature to assume this will be reflected in a reduction in
lending rates anytime soon. However, the employment picture remains critical to
the medium-term outlook and for the time being, that remains solid.
“As far as the lettings market
is concerned, the imbalance between demand and supply still appears unusually
extended leading to rent expectations in the survey remaining at elevated
levels and it is difficult to see this changing anytime soon in the current
environment. “
