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Press release

9 JUN 2022

House prices set to rise despite buyer demand drop

Demand from prospective house buyers fell in May 2022, a potential side effect of the rising cost of living and higher interest rates, although house prices in the short term are expected to rise – this according to the latest UK Residential Market Survey (May), from the Royal Institution of Chartered Surveyors (RICS).

Respondents reported that new buyer enquiries had fallen in May, with a net balance of -7%, down from much more positive sentiment in April (net balance +8%). Some respondents put this down to some buyers tightening their belts as the cost of living begins to have an effect, and May’s result brings to an end eight consecutive positive results for new buyer enquiries.

As such, the volume of agreed sales saw little change, with a flat picture reported.  Sales expectations over the next three months are also predicted to be flat, (net balance +1%) from a rosier picture in April (net balance +10%). Looking over the next twelve months, expectations are that sales are set to decline with a net balance of -24% respondents commenting that they foresaw sales declining (down from -4% in April).

New instructions to sell homes were also largely flat during May, and 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. 

Given constrained supply, house prices continue to rise. A net balance of +73% of contributors reported an increase in house price during May. Broken down, all parts of the UK continue to see increasing prices, with growth exceptionally strong in Northern Ireland, Northern England and Wales.

Looking ahead, twelve-month price expectations did ease at the UK level for a third successive month. Although a net balance of +42% of survey participants still envisage house prices being higher in a year’s time, this is down from +78% in February and is the most moderate reading seen since January 2021. However, twelve-month price expectations remain positive across all parts of the UK at this stage.

In the lettings market, tenant demand continues to rise firmly according to a net balance of +48% of contributors – the same as in April. At the same time, landlord instructions continue to decline, with the latest net balance coming in at -13% following a reading of -16% seen previously. As a result, rental growth expectations over the next three remain elevated, returning a net balance of +58% in May.

Simon Rubinsohn, RICS Chief Economist, said:

“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.”

-ENDS-

Notes to Editors:

The full report on the latest residential market survey can be found here (INSERT LINK)

Selected feedback from respondents:

William Delaney AssocRICS (West End/Central London) Coopers of London Limited: “Cost of living, inflation, war in Ukraine and confidence in the government are some of the factors that are contributing to doubt. This is making some buyers very hesitant. Correctly priced interesting properties that are well presented still sell quickly.”

Kam MRICS, (Harrow) Ellis and Co: “Interest rate rise, cost of living increasing dramatically with petrol gas and electricity. This may affect buyers attitude.”

Lawrence Copeland FRICS, (Salford Quays And Manchester City Centre), Elbonmill Limited: “Rentals have started to reach their peak due to cost of living issues even though stock levels are low. Existing tenants not moving as this would mean an increase in rental to move to an alternative property.”

About RICS

We are RICS. Everything we do is designed to effect positive change in the built and natural environments. Through our respected global standards, leading professional progression and our trusted data and insight, we promote and enforce the highest professional standards in the development and management of land, real estate, construction and infrastructure.

Our work with others provides a foundation for confident markets, pioneers better places to live and work and is a force for positive social impact.

FOR MORE INFORMATION:

Email: press@rics.org

We are RICS

Everything we do is designed to effect positive change in the built and natural environments.

Through our respected global standards, leading professional progression and our trusted data and insight, we promote and enforce the highest professional standards in the development and management of land, real estate, construction and infrastructure.

Our work with others provides a foundation for confident markets, pioneers better places to live and work and is a force for positive social impact.

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