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January housing market outlook has 'turned modestly brighter'

January housing market outlook has 'turned modestly brighter'
Shekina Tuahene
Written By:
Shekina Tuahene
Posted:
08/02/2024
Updated:
26/02/2024

Surveyors’ opinions on buyer demand, agreed sales and new instructions were optimistic in January, pointing to a housing market rebound.

The Royal Institution of Chartered Surveyors (RICS) Residential Market Survey for last month showed that new buyer enquiries were up at 7%, an improvement on the score of negative 3% in December. 

RICS said this was in line with a slow, but modest, recovery in buyer demand and was the strongest level of activity since February 2022. 

Sentiment around agreed sales was also improved, with a score of 5% compared to negative 5% the month before. 

The level of supply started to return as respondents gave a score of 11% for new instructions, making it the first positive reading since March 2021. Also, 9% of respondents said market appraisals conducted in January were higher than a year ago. This was the first time this metric garnered a positive score since early 2022. 

House prices continued to fall, with respondents returning a result of negative 18% to indicate declines. However, this is the least negative reading since October 2022, suggesting a stabilisation in prices. 

Further recovery expected 

Looking ahead, surveyor respondents expect sales to rise over the next three months. For this, RICS received a score of 14% for sales activity, compared to scores of 11% and 6% in December and November respectively. 

Meanwhile, surveyors’ sentiment for sales over the next 12 months generated a score of 44%. 

House price growth is expected to stay flat going forward, with respondents giving a score of negative 2% for the near term, compared to negative 12% previously. 

Over the next 12 months, a net balance of 18% of respondents see house prices increasing. 

An improvement in activity 

Tarrant Parsons, senior economist at RICS, said: “The UK housing market has seen a continued improvement in buyer activity through the early part of the year, supported by the recent easing in mortgage interest rates. Although sales volumes through much of the year ahead are likely to remain relatively subdued compared to the longer-term average, the outlook has now turned modestly brighter on a consistent basis over the past few survey reports.

“However, this is not to say that mortgage affordability isn’t still a significant challenge, and any further unwelcome surprises with regards to inflation may still cause interest rate expectations to be revised. That would then pose a significant risk to any prospective recovery in the months ahead, even if the current prognosis is for the market to see a further pick-up in activity levels.” 

Chronic rental supply and demand imbalance 

Some 28% of respondents said there was a rise in tenant demand in the three months to January. However, this was the most modest rise in three years. 

Supply is still being outweighed by demand, as respondents gave a score of negative 18% for new landlord instructions. 

This is expected to keep propping rental prices up, however, respondents gave a score of 41% for rental increases, which was softer than the scores of 52% and 61% in the previous two quarters.