Housing Market Witnesses Cautious Optimism with Rising House Sales

The latest RICS residential survey unveils a burgeoning sense of optimism within the UK housing market, evidenced by an uptick in house sales, new buyer enquiries, and listings. February’s data showcases a continued improvement in market confidence, marking a second consecutive month of positive buyer enquiries (+6% net balance), indicating a sustained rise in buyer demand. This trend persists despite predictions of mortgage rate stabilization, with most UK regions experiencing revived buyer interest in recent months.

Sales and Listings Indicate Market Revival
Although agreed sales remained relatively stable in February (-3% net balance), the slight dip from January’s figures doesn’t overshadow the notable improvement in sales activity compared to the previous year’s average net balance of -22%. Future sales expectations are looking bright, with a +42% net balance of respondents anticipating an increase in sales activity over the next year, reflecting optimism across all UK regions for the residential sales sector’s growth prospects.

One significant highlight from February’s survey is the substantial increase in new instructions to sell, recording a +21% net balance—the strongest since October 2020. This marks a departure from the consistent decline observed throughout 2023, with estate agents’ average stock levels reaching 42 properties, the highest figure since February 2021. The surge in market appraisals suggests a potential uplift in the housing supply, hinting at a more dynamic market moving forward.

House Prices and Rental Market Trends
While the overall trend in house prices across the UK points to a decline, there’s a noticeable shift towards stabilization, especially in London where price adjustments appear more evident. Future expectations lean towards growth, with a +36% net balance of respondents in England and Wales predicting house price increases within the next twelve months.

In the rental sector, tenant demand continues to grow, albeit at a slower pace, contrasted by a continued decrease in landlord instructions. This imbalance predicts a rise in rental prices in the coming months, though at a diminished rate compared to previous trends.

Simon Rubinsohn, RICS Chief Economist, expressed optimism about the sales market’s direction, attributing the positive changes to sustained buyer interest and an increase in new listings. He underscored the importance of continued stock supply to the market’s trajectory, particularly in light of challenges in new build availability. Rubinsohn also pointed out that while the rental market’s price surge might be slowing, the demand-supply gap suggests ongoing pressures for tenants.

Tom Bill, Head of UK Residential Research at Knight Frank, offered insights into the housing market’s recovery, linking it to potential shifts in mortgage rates and the broader economic climate, including employment trends. Bill also discussed the impact of recent changes to capital gains tax on the rental market, suggesting that political decisions continue to influence market dynamics, with potential consequences for rent levels.