Demand Falls as Prices Rise

Buyer enquiries fell in May of this year whilst the increase in our cost of living and rising interest rates are only having a modest effect on house prices, according to the Royal Institution of Chartered Surveyors (RiCS). RiCS survey participants also forecast that, in the short term, house prices will rise.

The recent UK Residential Market Survey shows that buyer enquiries fell by 1% in May compared to the previous month, bringing an end to eight consecutive months of increases in buyer enquiries. Survey participants believe that this slight shift is due to the public showing a reluctance to spend money because of the current cost of living crisis.

There was little movement in the statistics for sales agreed and the forecasts over the next three months is expected to remain stable. Over the next year, it is believed that the number of sales agreed will fall.

The Report says: “There seems to be little respite for lack of supply in the future, with respondents citing the weakest picture since December 2021 for new/requested market appraisals. This suggests there is little prospect of more homes coming onto the market in the immediate future.”

The study also highlights that house prices will continue to rise given the continued lack of supply with 73% surveyed reporting an increase in house prices during May. All parts of the UK continued to see rising prices.

The last three months is a strong indicator for the next year, and at present we can expect price expectations to continue to ease off as they have done since March. However, 42% of survey participants still believe that house prices will be higher in a year’s time. In February of this year, 78% of survey participants believed that house prices will be higher in 2023.

The Royal Institution of Chartered Surveyors chief economist Simon Rubinsohn says: “The increase in the cost of mortgage finance alongside growing concerns about the economic outlook is unsurprisingly having an impact, albeit a relatively modest one at this point, on buyer activity in the sales market.

“Despite this, prices are viewed as likely to remain resilient into 2023. But as is often the case in these circumstances, the pressure is likely to felt more visibly in transaction levels which are seen as likely to slow as the year wears on.”

“Meanwhile, what is particularly striking in the latest Rics survey is both the current and anticipated strength in the rental market. New instructions of property to let continue to fall according to respondents to the survey while demand is still very strong leading to rental levels being bid higher and greater challenges for tenants who aren’t in the position to compete for the available stock.”