Lettings market still strong while sales sentiment is...

The latest RICS Residential Survey, out today, points to an improved outlook for the housing market, with the more optimistic sentiment supported by a small easing in mortgage rates over recent weeks.

However, sales in the near term are only marginally positive, and other indicators remain in negative territory.

RICS measures its market snapshot through a sentiment survey of its members, expressed as ‘plus’ or ‘minus’.

At the UK level, the net balance reading for new buyer enquiries came in at minus 14 per cent in November. While this signals buyer demand is still falling, it is the least negative figure since April 2022. When viewed at a regional level, feedback is mixed regarding new buyer enquiries, with positive readings in both the North west, and Northern Ireland.

London’s new buyer enquiries have turned less negative (minus 12 from minus 31), as have other areas such as Wales (minus nine from minus 57), however Yorkshire and Humber and the North have seen further falls.

For agreed sales, the latest national net balance of minus 11 per cent compares with a reading of minus 23 per cent in October and suggests the downward trend in sales volumes is easing. East Anglia, the North West, and Northern Ireland are all seeing positive figures.

Looking ahead, near-term sales expectations over the next three months improved with the first positive reading since early 2022 (plus six). At the twelve-month time horizon sales expectations are much more positive with a net balance of plus 24 per cent of respondents foreseeing an improvement in sales activity, marking the most upbeat return for this forward-looking measure since January 2022.

House price sentiment has also turned less negative with a net balance of minus 43 per cent in November. While this continues to signal a fall in house prices, this sentiment has improved over the last three months, becoming less negative.

In the lettings market, although tenant demand continues to rise according to plus 20 per cent of respondents, this marks the most modest reading since January 2022. However, the supply challenge remains with landlord instructions remaining in decline.

Going forward, while twelve-month expectations have eased somewhat of late, rents are still projected to rise by close to four per cent at the headline level over the next year.

RICS Chief Economist, Simon Rubinsohn, says: “The latest RICS Residential Market Survey provides further evidence that sentiment is a little less negative than previously was the case with, critically, the new buyers enquiries indicator finally beginning to stabilise. This is being aided by increased confidence that the interest rate cycle has peaked which is reflected in somewhat more competitive mortgage products coming to the market.

“However, with the cost of money likely to remain elevated for some time to come and the economic outlook still downbeat, it is not surprising that the overall tone to the anecdotal remarks from survey respondents is still quite cautious.”

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