Gentle improvements in the housing market this summer

The housing market showed further signs of stabilisation in August, with buyer demand and agreed sales moving away from recent lows.

According to the Royal Institution of Chartered Surveyors (RICS) UK Residential Market Survey, however, both indicators remained negative, while interest rate uncertainty continued to weigh on prospects of recovery.

The net balance for new buyer enquiries rose to minus 19 per cent, its least negative reading since January and fifth consecutive improvement.

Agreed sales recorded a net balance of minus 17 per cent, the least negative result since February and an improvement from April’s low of minus 38 per cent.

Expectations for sales over the next three months moved closer to neutral territory, with a net balance of minus three per cent, raised from minus13 per cent in July.

Looking 12 months ahead, a net balance of plus six per cent of respondents anticipated higher sales volumes, compared with plus three per cent previously, pointing to a modest improvement in confidence.

House prices remained under downward pressure.

The headline price net balance edged up to minus 28 per cent from minus 29 per cent in July, extending a gradual improvement from April’s minus 35 per cent.

Respondents still expected price reductions over the next three months, with a broadly stable outlook over the next 12 months.

Regional differences persisted. London’s price balance remained more negative than the headline average, although it improved on July.

Northern Ireland continued to report rising prices, while the North West of England maintained a period of gentle price growth.

The flow of new sales listings was broadly unchanged, with the new instructions net balance at zero, compared with minus two per cent in July.

A market appraisals balance of minus 17 per cent indicated weaker activity than a year earlier, suggesting limited scope for a near-term expansion in the listings pipeline.

In the lettings market, rising tenant demand and constrained supply continued to put upward pressure on rents.

The monthly tenant demand net balance stood at plus 18 per cent, while landlord instructions remained negative at minus 14 per cent.

The net balance of respondents expecting rents to rise over the next three months increased to plus 44 per cent, from plus 33 per cent in July.

Over the next 12 months, respondents expected UK rents to increase by around 3 per cent on average.

RICS head of market research and analysis, Tarrant Parsons, said: “August’s results show a market that is gradually finding its footing, with key activity indicators having become progressively less negative over recent months.

“That said, any potential recovery remains fragile and faces two significant near-term tests.

“The Bank of England’s increasingly hawkish tone, on the back of renewed volatility in global energy markets, is a reminder that the borrowing cost outlook could yet deteriorate further.

“And with the October Budget approaching, speculation over potential changes to property taxation is adding another source of caution for both buyers and sellers.

“As such, headwinds over the shorter term remain pronounced, even though recent market trends have appeared more stable.”