House prices under pressure, reports RICS

The Royal Institution of Chartered Surveyors (RICS) UK Residential Survey for August 2023, portrays a market continuing to slow with house prices remaining on a downward spiral.

The survey indicator for house prices nationally, in terms of net balance, continued to fall from -55 in July, to -68, marking the most negative reading since 2009.

New buyer enquiries declined slightly from the -45 posted last time, to -47, with new sale instructions following a similar trend, slipping from -17 in July to -26 this time round.

Survey respondents reported a decline in newly agreed sales, falling from -45 to -47, which marks the weakest reading for this indicator since the pandemic.

Looking ahead, near-term sales expectations remain subdued, although the net balance has turned marginally less negative, at -38%, compared to last month’s reading of -45%. On a twelve-month view, the trend in home sales is anticipated to flatten out, evidenced by the net balance moving from -25% in July to -5% in August.

Looking across to the lettings market, conditions remain more positive than the sales market, with a net balance of +47 of survey respondents noting a rise in tenant demand (+59 in July). However, new landlord instructions fell slightly with a reading of -20 (-19 in July).

Given this mismatch between demand and supply, a net balance of +60% of contributors foresee rental prices being driven higher over the coming three months.

RICS Chief Economist, Simon Rubinsohn, commented: “The latest round of feedback from RICS members continues to point to a sluggish housing market with little sign of any relief in prospect.

“Buyer enquiries remain under pressure against a backdrop of economic uncertainty and the high cost of mortgage finance. Meanwhile, prices are continuing to slip albeit that the relatively modest fall to date needs to be seen in the context of the substantial rise recorded during the pandemic period. Critically, affordability metrics still remain stretched in many parts of the country.

“The other side of the softer demand in the sales market is the continuing strength of rental demand. The yawning gap with rental supply is clearly visible in the RICS Rent Expectations indicator which remains close to an all-time high.

“Anecdotal comments from contributors that landlords are leaving the sector suggests the challenging environment for tenants is unlikely to improve any time soon”.