RICS: Buyers and sellers are returning to the property market amid hopes of rate cuts

Research suggests the property market is becoming busier after a lacklustre 2023, but how long will it last?

aerial view of houses
(Image credit: Getty Images)

Property professionals are becoming more positive about the long-term prospects for the housing market even as expectations of interest rate cuts have been pushed back.

Home buyers benefited from a mortgage price war in the first months of the year as lenders cut rates in anticipation of the Bank of England cutting the base rate early this year.

This has boosted property market activity, with the Royal Institution of Chartered Surveyors (RICS) reporting that its members – estate agents and surveyors – have been become busier after a slower market in 2023.

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But this isn’t expected to be reflected in house prices until later this year.

The RICS seeks the views of its agent and surveyor members each month to get a sense of the housing market mood, and generates a percentage balance figure based on whether indicators such as house prices and sales are rising or falling.

Its headline house price figure shows a net balance of +10% expect prices to fall over the next three months as the market stabilises and mortgage rate cuts easer.

However, on a 12-month view, +36% of respondents across England and Wales now predict house prices returning to growth, up from a reading of +18% in January. 

Increased positivity in the property market

The RICS survey has reported a positive start to 2024 as lower mortgage pricing boosted demand.

Rate cuts may have eased but buyer enquiries stayed positive for the second successive month in February, with a net percentage balance figure of +6%.

Most UK regions have now shown a recovery in buyer interest over the past two months, RICS said.

The level of new instructions to sell a home hit their highest level since October 2020, with a net balance of +21% reporting a rise, in contrast to the continuously negative picture cited throughout 2023.

Meanwhile, average stock levels on estate agents books now sit at 42 properties, the highest since February 2021, giving buyers more choice.

A net percentage balance of -3% reported a drop in agreed sales in February, according to the report but are expected to rise over the next three and 12 months.

“The February RICS survey provides some grounds for encouragement around the sales market with not just buyer interest staying positive for the second successive month but also the uplift in new instructions to agents,” says Simon Rubinsohn, chief economist for RICS. 

“Whether the increase in stock coming back to the market will be sustained is likely to be a critical factor in explaining how things play out over the balance of the year especially with new build likely to remain constrained. Significantly, the rise in the number of appraisals taking place points in the right direction. And the government will be hoping that this trend is given a boost by the change to capital gains tax announced in the Budget.” 

Is now a good time to sell a property?

The housing market slowed in 2023, with both sales and prices down.

But falling inflation and frozen interest rates have prompted mortgage lenders to cut their pricing in recent months.

This has boosted demand, although some lenders have begun putting rates back up due to rising swap rates and expectations of a later than expected cut in the base rate.

Many commentators still expect house prices to fall this year, although some such as property brand Knight Frank have revised their forecasts upwards.

“The economic data has fluctuated since Christmas but the direction of travel for the housing market is up as mortgage rates ultimately head in the opposite direction,” says Tom Bill, head of UK residential research at Knight Frank.

“Ironically, recent weakness in the jobs market is a positive sign for buyers and sellers as pressure on the Bank grows to cut rates sooner rather than later, leading to more mortgages starting with a 3. For anyone in the property market trying to time their decision, they would be well-advised to follow employment trends closely this year.” 

Sarah Coles, head of personal finance, Hargreaves Lansdown, is more cautious though.

While the return of buyers is something to be celebrated, it needs to be seen in the context of a slight fall in agreed sales and lower prices than the same time a year earlier, while many will have purchased using cheaper mortgages agreed a few months ago.

“It's important not to underestimate the power of sentiment though,” adds Coles.

“Those who earn more than average will be feeling better off, thanks to easing inflation and tax cuts. Meanwhile, more positive news on economic growth could inspire more hope. The estate agents are definitely more positive about the future. It remains to be seen whether this is just in an estate agent’s nature, or whether better times really do lie ahead.

“If this is the dawn of a new age of optimism, it’s a boon for sellers, but yet more bad news for first-time buyers, who will have to wrestle with even more price rises at a time when mortgage rates are still significantly higher than they were.”

Marc Shoffman
Contributing editor

Marc Shoffman is an award-winning freelance journalist specialising in business, personal finance and property. His work has appeared in print and online publications ranging from FT Business to The Times, Mail on Sunday and The i newspaper. He also co-presents the In For A Penny financial planning podcast.