Over the past six months RICS’ monthly UK Residential Market Survey has demonstrated buyers’ and sellers’ changing mind-set from complete dejection to mild hope. With many seemingly believing that the market was on course to stabilise, down from its ‘Pandemic High.’ This analysis is based on RICS surveyors’ assessment of the market from their perspective on the ground.
However, this was all before the ONS released its latest inflation figures on the 11th of May showing core inflation had risen, leaving many reconsidering their timelines for moving bringing it either forward or retreating.
Recent economic bombshells have put the possibility of a recession back on the table and reset interest rates back to October 2022, when many wished Kwarteng had kept his ‘mini budget’ to himself. This has once again stretched buyers’ already fragile affordability, further exposed overleveraged buy-to-let landlords and made those facing remortgaging or on variable rates struggle to sleep at night. The result – a property market riddled with doubt.
Tracking UK housing market over Q1 2023
At the start of the year everyone was suffering from the Truss hangover. First time buyers disappeared along with the help to buy scheme as they found their budgets slashed with interest rate hikes. It was only when news spread that we had dodged a recession, combined with Halifax and Nationwide HPIs reporting a break from the successive negative property price growth statistics in Feb/ March and April respectively, that sellers and buyers felt confident that the tide had shifted and now was as good a time as any to get moving.
This latest RICS survey data demonstrates this as new buyer enquiries increased from -34% in April to -18% in May. Though not life affirming, it’s the least negative figure of the past twelve months
The same can be said with agreed sales which had a net balance of -7%, a marketed improvement on March’s -29%.
New instructions broke a run of 13 successive negative monthly readings to mark the strongest reading since March 2021, rising by a net balance of +14% as sellers rationalised that discounts would be less as the economic mood improved along with the weather. (If we know anything about the UK weather it’s subject to change – it’s why we talk about it non-stop).
House price predictions, despite still being in the red, were again less pessimistic with surveyors citing a net balance of -30% in May. This was a result of buyers being swayed by news of dodging a recession and the HPI indexes’ reprieve. If they managed to negotiate a discount and still had a good interest rate locked in, why wait? This was accentuated if facing a section 21 or rent renewal.
Current UK property market activity
On the ground, I’m noticing more and more houses are coming to the market. Some sellers that previously decided to hold back until the autumn, when they thought rates would normalise, have decided now is as good a time as any to put their property on. If you can’t afford to wait the market out for another year or two, and don’t want to risk prices dropping further, this makes sense. Apartments are selling but with discounts, whilst the top of the market remains delusional – pitching overly high, knowing they are going to be chipped. Chipped in this market isn’t a few £10,000 but £100,000s to millions. At the same time, if a property is in a sought-after area and priced right, it will get its price or close to it.
But what was happening in the property market a few weeks ago is not the same as what is happening today. Jeremy Hunt is “comfortable with a recession” if it brings inflation down but at what cost?
News is powerful, and buyers and sellers are feeling a sense of groundhog day as we yo-yo back to the start of the year, leading to a very sticky and sweaty summer market.