The Royal Institution of Chartered Surveyors (RICS) UK Residential Survey for July 2023 paints the picture of a housing market continuing to lose ground to the effects of higher mortgage rates.
At the national level, new buyer enquiries posted a figure of -45%, like last month’s figure of -46%. As a result, this metric continues to signal a sharp downturn in buyer demand following the latest escalation in mortgage interest rates.
When viewed at the level of the English regions and the four nations, all parts of the UK display a firmly negative return for new buyer enquiries over the month.
In keeping with the deteriorating demand backdrop, a net balance of -44% of respondents noted a decline in agreed sales during July. This is down from a figure of -36% previously and represents the weakest reading for the sales measure since the early stages of the pandemic.
Looking ahead, near-term sales expectations have turned increasingly subdued, posting clearly negative reading of -45% in July. This is substantially weaker than the respective net balances of -38% and -11% in June and May. Furthermore, on a twelve-month view, sales volumes reports a net balance of -25%, indicating a decline, although this reading is marginally less downcast than a reading of -31% in June.
Looking at trends in fresh listings coming onto the sales market, the headline new instructions net balance slipped to -13% in July, compared to -3% in June. This indicates a renewed deterioration in the flow of supply. Alongside this, contributors continue to report the number of market appraisals undertaken over the month to be below that seen in the comparable period last year recording a -37% result on that metric. At the same time, inventory levels on estate agent’s books have held broadly steady over the past few months, averaging close to 38 properties. Although this is higher than the lows seen towards the end of last year, supply levels remain very tight on a longer-term historical comparison.
Turning to the lettings market, tenant demand rose firmly over the three months to July evidenced by a reading of+54% of respondents citing an increase. In fact, this points to the strongest quarterly pick-up in rental demand since the start of 2022. Set against this, landlord instructions declined once again, with the latest net balance falling to -30% from -24% beforehand. On the back of this enduring mismatch between rising demand and dwindling supply, a net balance of +63% of respondents expect rental prices to increase over the coming three months. This is up from a figure of +55% in the previous quarter and marks a fresh record high for the series.
RICS Chief Economist, Simon Rubinsohn, said: “The recent uptick in mortgage activity looks likely to be reversed over the coming months if the feedback to the latest RICS Residential Survey is anything to go by. The continued weak reading for the new buyer enquiries metric is indicative of the challenges facing prospective purchasers against a backdrop of economic uncertainty, rising interest rates and a tougher credit environment.
“Just as concerning are the insights being provided around the lettings markets. Demand shows no signs of letting up, supply remains constrained and that means rents are likely to continue rising sharply despite the cost-of-living crisis.”
