Housing market outlook has turned modestly brighter, say surveyors

The housing market outlook has turned “modestly brighter” according to surveyors, with overall increases in buyer demand, newly agreed sales and new instructions to sell in January.

Previously, property professionals had seen demand, sales and instructions falling, the Royal Institution of Chartered Surveyors (Rics) said.

A net balance of 7% of professionals reported new buyer inquiries increasing rather than falling in January, whereas in December, a balance of 3% had seen buyer inquiries decreasing rather than rising.

While still relatively modest, it is the strongest demand seen since February 2022, Rics said.

A net balance of 5% of professionals saw agreed sales rising, while in December a balance of 5% had seen sales falling.

Looking at supply, January saw a small pick-up in the flow of new instructions being listed on the sales market, with a net balance reading of 11%. Having been stuck in negative territory over much of the past few years, January’s reading was the most positive on this measure since March 2021, Rics said.

A balance of 18% of professionals reported house prices falling rather than rising, indicating continuing price falls overall.

London stands out as exhibiting a more stable trend for prices in January, Rics said. Professionals based in Scotland and the north-west of England also cited a generally flat picture for house prices in recent months.

In the lettings market, professionals continued to see tenant demand increase, while the volume of landlord instructions fell.

The imbalance between supply and demand is expected to drive rental prices higher over the coming months, according to the report.

Rics senior economist, Tarrant Parsons, said: “The UK housing market has seen a continued improvement in buyer activity through the early part of the year, supported by the recent easing in mortgage interest rates.

“Although sales volumes through much of the year ahead are likely to remain relatively subdued compared to the longer-term average, the outlook has now turned modestly brighter on a consistent basis over the past few survey reports.

“However, this is not to say that mortgage affordability isn’t still a significant challenge, and any further unwelcome surprises with regards to inflation may still cause interest rate expectations to be revised.

“That would then pose a significant risk to any prospective recovery in the months ahead, even if the current prognosis is for the market to see a further pick-up in activity levels.”