RICS: Buyer demand has risen, but will house prices go up?

Various property signs outside a block of flats advertising homes for sale, let or sold.

(Image credit: Getty Images - Richard Newstead)

published 11 April 2024

Property professionals are feeling more positive about the housing market, according to the latest survey from the Royal Institution of Chartered Surveyors (RICS).

Survey participants report seeing more buyers and sellers steadily returning to the market – a trend they expect to continue over the next 12 months.

If you’re a homeowner hoping to see your house go up in value, this will be music to your ears. But it might be too early to pop the champagne.

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The RICS report paints a slightly different picture to the latest house price data from Nationwide and Halifax, released earlier this month.

While both lenders report that prices are up compared to a year ago, Nationwide saw prices fall by 0.2% on a monthly basis in March.

Meanwhile, Halifax reported a slowdown in growth compared to February, as prospective buyers continue to struggle with affordability constraints.

With mortgage rates still high, we look at whether it’s too early for optimism.

Property market sentiment is improving

Each month, RICS asks its members (agents and surveyors) a list of questions to gauge their mood on the property market.

Using their responses, it generates a percentage balance figure on key metrics such as house prices, buyer demand, and the volume of new property listings.

The latest RICS survey paints a positive picture. In March, agents and surveyors reported rising buyer demand, with a net balance of +8%. This is the most positive reading since February 2022.

New property listings also picked up for the fourth consecutive month, coming in at a net balance of +13%.

For the seventh month in a row, respondents were less negative on house price trends too. The figure came in at a net balance of -4%, up from -67% in September 2023.

While the latest figure is still negative, it “suggests a largely stable picture is in place for house prices”, according to RICS.

What’s more, the report adds that “respondents continue to foresee house prices returning to growth over the next 12 months”. But are they right?

Will house prices go up, or is it too soon for optimism?

This month’s RICS report paints a rosier picture for the housing market. But it is important to remember that it is based on sentiment rather than actual house price data.

While the power of sentiment to drive markets should not be underestimated, it remains to be seen whether it will translate into house price rises in this instance.

For example, both the Nationwide and the Halifax House Price Indices (HPI) tell a slightly less positive story.

While both indices show that house prices are up compared to a year ago, the Nationwide HPI saw prices fall by 0.2% in March on a seasonally-adjusted basis. Meanwhile, Halifax saw house price growth slow to 0.3% in March, down from 1.6% in February.

Commenting on this, Nationwide’s chief economist Robert Gardner said that activity “remains relatively subdued by historic standards”.

Indeed, mortgage rates remain high, and are preventing many prospective buyers from taking the next step. While rates have fallen from their peak of almost 7% in August 2023, they are still significantly higher than their long-term average.

A pricing war at the beginning of the year saw mortgage providers fight to offer slightly more competitive rates, but these deals have now been pulled and rates have risen again since.

The average two-year fixed mortgage rate is currently 5.81%, while the average five-year rate is 5.39%, according to data analyst Moneyfacts.

The Bank of England has held the base rate at 5.25% for five consecutive meetings, and most market experts aren’t expecting a cut until June at the earliest. Even then, rates aren’t expected to fall precipitously.

With this in mind, house prices are unlikely to rise dramatically any time soon.

Despite the optimism expressed in the latest report, this is something that RICS’ senior economist Tarrant Parsons acknowledges. While “near-term sales expectations point to an improving outlook, [...] the scope for an acceleration in activity will still be relatively limited given mortgage rates”, he says.

Is now a good time to buy or sell a house?

House prices have risen so far this year overall and are up compared to this time last year, despite Nationwide reporting a negative month-on-month figure in March.

With property professionals now reporting more buyers and sellers coming to market, those who are in a strong financial position might be tempted to act now before prices creep up any further.

The flipside is that mortgage rates could come down slightly if you hold out for a Bank of England rate cut. However, as explored previously, mortgage rates aren’t expected to fall dramatically and are likely to remain well above their pre-pandemic levels for some time yet.

What’s more, leave it too long and you could be hit by higher stamp duty.

In 2022, the government temporarily increased the residential nil-rate threshold from £125,000 to £250,000 for regular buyers, while increasing it from £300,000 to £425,000 for first-time buyers. However, this temporary measure comes to an end on 31 March 2025.

That’s some way off yet, but it is worth bearing in mind given how long it can take to find and complete the sale of a house.

If you are looking to sell, you will be pleased to hear the RICS survey’s findings on increased buyer demand. However, it is worth remembering that pricing is everything.

Recent research from Rightmove revealed that homeowners are far more likely to sell their house quickly if they get the price right the first time. So, while it might be tempting to try your luck, an overly ambitious asking price could end up coming back to bite you.

Katie has a background in investment writing and is interested in everything to do with personal finance, politics, and investing. She enjoys translating complex topics into easy-to-understand stories to help people make the most of their money.

Katie believes investing shouldn’t be complicated, and that demystifying it can help normal people improve their lives.

Before joining the MoneyWeek team, Katie worked as an investment writer at Invesco, a global asset management firm. She joined the company as a graduate in 2019. While there, she wrote about the global economy, bond markets, alternative investments and UK equities.

Katie loves writing and studied English at the University of Cambridge. Outside of work, she enjoys going to the theatre, reading novels, travelling and trying new restaurants with friends.