The latest residential sentiment survey from the Royal Institution of Chartered Surveyors suggests a currently-subdued housing market but with a more promising outlook for sales activity across the UK following the General Election and the prospect of a fall in mortgage rates.
Over the next three months, a net balance of +20 of survey respondents anticipate a recovery in residential sales up from +10 in June and the highest level of sales expectations since January 2022.
These results indicate that respondents have confidence in the newly elected Labour government which has voiced a strong commitment to boosting the housing market, aiming to deliver 1.5m homes over the next five years, a figure not hit since the 1960s.
Looking at price expectations over the next 12 months, a net balance of +54 of respondents believe prices will continue to rise, highlighting a key challenge for the new government as boosting housing supply in the UK will not be an easy task. However, any boost to confidence from aspects such as the possibility of lower interest rates should in theory intensify the nation-wide affordability challenge.
Tarrant Parsons, RICS senior economist, says: “Although activity across the housing market remained subdued last month, forward looking aspects did improve slightly.
“There are some factors emerging now that could support a recovery in the months ahead. If the Bank of England does decide that the current inflation backdrop is benign enough to start loosening monetary policy next month, this may prompt a further softening in lending rates. In addition, the recent election delivered a clear outcome, with housing pushed up the political agenda.”
Looking across to the rental market, a net balance of +28 of respondents saw a pick-up in tenant demand during June (part of the non-seasonally adjusted data).
Meanwhile, the new landlord instructions net balance slipped from -3 to -11, pointing to a renewed decline in new rental listings. Looking forward a net balance of +38 of respondents anticipate that rental prices will rise over the coming three months – a trend seen since January.
In response to the survey Sarah Coles, head of personal finance at business consultancy Hargreaves Lansdown, says: “A new government has breathed a new air of optimism into the property market. Agents are hoping this means sales will pick up, and falling house prices will reverse in the year to come.
“It’s the most positive agents have been about sales since the start of 2022, and they’re walking to viewings with a new spring in their step. However, it remains to be seen whether buyers will share their view.
“Before the election, June brought more of the bad news the market has been used to seeing – with falling sales and prices, and dwindling buyer numbers. Things were so miserable that even the number of new sellers fell back. It wasn’t helped by stubbornly high mortgage rates, with Moneyfacts figures showing the average two-year fixed rate remained just shy of 6% for most of the month.
“July may hold more hope, in part because of the election result, and the arrival of a new government. This isn’t because of anything promised during the campaign. Labour didn’t pledge any particular policies to boost demand – except an extension of the mortgage guarantee scheme for those with smaller deposits. Instead, agents are holding out hope for an upswing in consumer sentiment, buoyed by the optimism that a change at the top can engender, and hope that life in general will change for the better.”
