RICS: Property listings rise, but buyer demand cools

Property listings increased in April, and there is a strong feeling that housing market activity will pick up in the latter part of the year and into 2025, according to the latest survey from the Royal Institution of Chartered Surveyors (RICS).

This is putting a spring in the step of the UK housing market.

However, the number of new buyers has fallen, after three months of rises – likely caused by an increase in mortgage rates.

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RICS notes that the lack of buyers indicates a “more stagnant market” currently, with a “notable loss of momentum mainly seen in London and southern parts of England”.

Simon Rubinsohn, chief economist at RICS, comments: “Feedback to the latest RICS survey demonstrates the sensitivity of the sales market to interest rates at the present time, given the continuing challenge around affordability.

“A modest back up in mortgage pricing has contributed to the flatlining in the buyer enquiries metric over the past month, as well as the slightly more cautious signals around near-term expectations.”

New property listings

The number of new listings from sellers has grown, and is at its most positive since September 2020.

There are now an average of 43 properties available per estate agent branch.

According to the RICS survey, which polls estate agents and surveyors, sellers are likely to be feeling more comfortable in listing their properties as market conditions continue to improve following the pandemic.

Sarah Coles, head of personal finance at the wealth manager Hargreaves Lansdown, says: “For those who can afford to buy right now, there’s plenty on offer, and room to drive a hard bargain. With prices set to remain vulnerable, buyers will be keen to haggle, to protect themselves against more price weakness in the coming months.”

Average UK property prices rose by just 0.1% last month, compared to March, according to the latest Halifax house price index.

On an annual basis, prices were up 1.1% but the lender put this down to the weak housing market performance it recorded in April 2023.

A lack of buyers

Coles notes that the optimism that permeated the property market earlier this year has all the makings of a buyers’ market – except for the fact there are so few buyers.  

“The first three months of the year saw cautious buyers emerge from the woodwork. Falling mortgage rates in January persuaded them to dip their toe into the pool of properties. It also saw sellers flock back to the market, and for-sale signs sprang up across the country,” she comments.

“However, as mortgage rates have risen steadily since, it has squeezed buyers out again, leaving these properties unviewed and unloved.”

Most major lenders have increased their mortgage rates over the past two weeks, with rises of at least 0.2%, with some going further and hiking rates by more than 0.4%.

Nationwide, Halifax, Barclays, NatWest, HSBC, Santander and Leeds Building Society are some of the lenders that have upped their mortgage rates. Experts say the initial increase was due to a spike in swap rates in mid-April.

According to the RICS survey, the headline net balance indicator for new buyer enquiries dropped from +6 to -1 in April, marking the end of three consecutive positive monthly results.

Property market sentiment 

In terms of short-term expectations for property sales, property professionals aren’t feeling very positive.

The net balance for sales expectations over the next three months dropped to -1, the lowest since October 2023, suggesting a stagnant near-term outlook, says RICS.

This is due to uncertainty of financial market effects, especially the reduction in expectations regarding how much the Bank of England might loosen monetary policies this year.

Analysts had expected interest rates to be cut in the spring, but this has now been pushed back to the summer. Base rate is still at 5.25% after being frozen at the last five Bank of England meetings.

However, the general sentiment from survey respondents continues to point to a stronger picture for overall sales market activity over the next 12 months.

Rubinsohn comments: “There is still a strong perception that activity in the market will pick up in the latter part of the year and into 2025, irrespective of any political uncertainty around the general election.”

What about the rental market?

Landlord numbers fell again last month, while the number of tenants keeps rising – and estate agents expect rents to increase.

Landlord instructions remain in short supply, recording a net balance of -13 (-18 last month), again pointing to a weakened picture, according to RICS.

Moving forward, rents are expected to rise by a net balance of +33, although this growth expectation marks a three-year low.

“As far as the lettings market is concerned, an increasing number of respondents are also drawing attention to affordability constraints, and this is reflected in a more modest pace of rental growth. But a fundamental problem in the market across much of the country remains the imbalance between demand and supply with new instructions continuing to decline,” says Rubinsohn.