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UK housing market continues downward trend in January

Nick Cheek
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Nick Cheek

Activity in the housing market continued to wind down in January, as buyer demand, sales, listings and prices all declined during the month.

Activity is expected to be muted in the near-term as the market gets used to the higher rate environment, according to the Royal Institution of Chartered Surveyors (RICS).

Its residential market survey for January – presented as scores between negative 100 (a decline) and 100 (positive increase) suggested that new buyer enquiries fell to -47% in January.

This is down from a score of -40% in December, making January the ninth month in a row where buyer enquiries generated a negative score. 

Demand either fell or remained flat in all regions of the UK, the responses suggested. 

Simon Rubinsohn, chief economist at RICS, said: “Although some respondents to the January RICS survey have noted a little more interest in the housing market as the New Year got underway, the overall tone of the feedback still remains subdued which is not altogether surprising given the jump in mortgage rates since the autumn.  

“Prices, meanwhile, are now beginning to reflect the shift in balance between demand and supply.  

“However, it is questionable how much downside to pricing there is likely to be given that recent macro forecasts from the Bank of England and others are now envisaging a less harsh economic environment this year.” 

The number of new listings coming to market declined, with a negative reading of -14% of respondents citing a fall. 

House prices slipped with a response score of -47% compared to -42% the month before, pointing to a depreciation of values. The sharpest declines in house prices were noted in the East Midlands and the South East. 

Optimism ahead 

Looking ahead, expectations for sales activity over the next 12 months received a net balance score of -20%. This compared to -42% in December, indicating that respondents expect the market to pick up eventually. 

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “The degree of pessimism appears to be easing slightly. Since the horrors unleashed by the mini Budget, the reversal of an awful lot of measures means the market is forecasting lower rates than it was. As a result, fixed rate mortgages have been getting cheaper. 

“Agents are increasingly hopeful that a combination of the two could persuade buyers to return.”  

She added: “There’s always the risk that this optimism is misplaced. It remains to be seen how much damage has been done to buyer confidence during the past few months, and how the health of the market will hold up if the official figures feed us a monthly dose of misery.”  

Rental demand strengthens 

Tenant demand rose to a net balance of 43% across the UK. However, supply contracted as landlord instructions fell again with a reading of -14%. This is the tenth quarter running where a decline has been reported. 

Some 64% of respondents believe Build to Rent will help to address the issue of supply in the market going forward, but just 48% believe this part of the market will successfully boost supply in the long-term. 

Rubinsohn added: “The rental market continues to show strong interest from tenants and limited stock available which is keeping a firm momentum to rental growth.  

“While Build to Rent clearly has a role to play in helping to fill this gap, the insights from the latest survey suggest that this is not going to be sufficient, at least in the near term, to address the challenge in this market.”