The residential sales market continues to strengthen but the chasm between the supply of properties available for let and rising public demand continues to expand, The Royal Institution of Chartered Surveyors (RICS) UK Residential Market Survey for October found.
House prices overall continued to rise (+16% net balance) and all regions reported price growth apart from Yorkshire and the Humber, and the South West, with figures indicating decreasing prices (-23% and -4%, respectively).
The perception of rising prices across most of the UK is supported by new buyer enquiries registering a +12% result in October and extends a run of growing demand to four successive months.
Virtually all parts of the UK are expected to see a rise in house prices in the year to come, led by firm growth across Northern Ireland and Scotland.
SUPPLY AND DEMAND CHASM
But the chasm between the supply of properties available for let and rising public demand continues to expand.
A net balance of +19% reported increasing tenant demand over the three months to October. At the same time, landlord instructions fell over the same timeframe.
RUSH TO BUY
Tina Paillet, RICS President, says: “The growth in residential sales could be further supported by recent interest rate announcements by the Bank of England.
“Meanwhile, the pending expiration in the higher stamp duty threshold in spring 2025 may cause homeowners and first-time buyers to rush to take advantage of the current rate, but this will likely be followed by a weaker trend after the deadline has passed.
“Our data continues to indicate that renters are feeling the pressure from a limited supply of rental properties and rising rents.
“While the Autumn Budget announcement of immediate stamp duty increases for landlords acquiring rental properties may increase opportunities in supply for owner-occupiers, it will make it more challenging to address the critical shortage of rental homes.”
BRIGHTER TREND
And Tarrant Parsons, RICS Head of Market Analysis, adds: “The UK housing market saw a continued pick-up in activity through October, with the recent improvement in buyer demand translating into growth in the number of sales being agreed.
“Just as importantly, forward-looking sentiment points to this brighter trend remaining in place of the coming months.
“That said, the rise in bond yields following the Budget, alongside a general increase in financial market implied interest rate expectations over the past couple of weeks, will likely present something of a headwind for the market to contend with over the short term.”
REMOVING UNCERTAINTY
Tom Bill, head of UK residential research at Knight Frank, says: “The budget removed some uncertainties for buyers and sellers but created others. While there is now clarity around stamp duty and capital gains tax rates, we expect house prices and transaction volumes to come under pressure due to rising mortgage costs.
“While we don’t know how successful Labour’s revenue-raising plans will be or the exact shape of the economic policies pursued by the new US President, the trajectory for borrowing costs is unclear.”
RENTERS’ RIGHTS BILL
And he adds: “Tenants may end up bearing the brunt of the government’s Renters Rights Bill if more landlords decide to sell up, which would put upwards pressure on rents.
“Interventions in the housing market have a well-established track record of unintended consequences and this piece of legislation may prove to be no exception.”
