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Housing market shows slight signs of recovery in February but prices continue to drop

Nick Cheek
Written By:
Nick Cheek
Posted:
Updated:
09/03/2023

The UK housing market was still subdued in February but there were hints of a stable year ahead.

The regular Royal Institution of Chartered Surveyors (RICS) Residential Survey for the month showed that while activity continued to slip, there was an uplift on January’s mood. 

The responses for the level of new buyer enquiries came to -29%* (-100% being lowest, 100% being highest), a softening of the previous month’s -45% score. While the score still indicates a decline in demand and is the tenth consecutive month to show a negative reading, it was the least negative result since July 2022. 

New property focus

The level of new properties coming to market also improved in February and received a response score of -4%. This was compared to -12% in January and -22% in December. 

Respondents gave a score of -26% for the number of newly-agreed sales they were seeing, an improvement from the previous month’s score of -36%. 

RICS said the time it took for a sale to complete was rising and was now at an average of 19 weeks. 

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Worries about the cost of living and availability of mortgages mean homes are taking longer to sell and keeping prices in check.  

“However, recent falls in lending rates, inflation and increasing property choice is contributing to a readjustment in the previously severe imbalance between supply and demand which we expect to continue into the spring.” 

However, there are other experts who are less optimistic about a springtime adjustment.

Sarah Coles, head of personal finance at Hargreaves Lansdown: “Things are getting worse more slowly, but while the agents in the RICS report are finding reasons for optimism, this may be premature.” 

She said buyer and seller numbers, agreed sales and prices were “on their way down” and people were having to accept an offer to shift their properties. 

Coles added: “Despite pockets of enthusiasm, these aren’t signs of a rising market.”

House price changes 

Meanwhile, the report showed that house prices continued to fall in February. Respondents gave a score of -48% for house price movements during the month, which was little changed from the score of -46% in January. 

This is expected to improve going forward, as the response score for house prices in the next three months came to -55% which was less negative than -63% in January, suggesting house prices will decline but not as severely. 

Asking price being cut

RICS also asked about the difference between asking and sales prices. 

In the mainstream market, for homes up to £500,000, 60% of respondents said sales were being agreed below asking price. For homes between £500,000 and £1m, 70% were being sold for less than the asking price. 

For the most part, sales were being agreed within a 5% margin of the asking price.  

* RICS survey statistics are presented as scores between negative 100 and 100, with negative scores implying a decline, and positive readings suggesting an increase.