Published On: Thu, May 9th, 2024
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Home price crisis sees new buyer inquiries for properties flatline | Personal Finance | Finance

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A net balance of 23% of professionals noted an increase in new instructions to sell during April (Anthony Devlin/PA) (Image: PA Archive/PA Images)

Surveyors have reported a stagnation in new home buyer inquiries in April, following three consecutive months of increases, due to challenges with affordability.

The Royal Institution of Chartered Surveyors (Rics) has indicated that the recent recovery in buyer demand appears to have slightly cooled off, as mortgage rates have begun to rise over the past few weeks.

In April, a net balance of one percent of property professionals reported a decrease rather than an increase in new buyer inquiries, compared to a balance of six percent reporting an increase in inquiries in March.

According to Rics, the regional feedback on buyer demand is varied, with a significant slowdown primarily observed in London and the southern regions of England.

When considering the number of properties available on the market, a net balance of 23 percent of professionals reported an increase in new instructions to sell during April.

This figure represents the most positive since September 2020, according to Rics.

The report also stated that average stock levels have risen to a three-year high, with 43 properties per branch.

UK Interest rates shown on a graph

A graph shows the recent changes in UK interest rates (Image: PA Graphics/Press Association Images)

There has also been an improvement in agreed sales, with a net balance of five percent of professionals reporting an increase rather than a decrease in transactions.

However, despite this being the most positive reading since May 2021, it only suggests a slight increase in monthly sales, the report concluded.

A mere one percent of property professionals are bracing for a dip in house sales over the next quarter, the gloomiest forecast since October 2023, according to the latest figures.

In contrast, a significant net balance of 33 percent of surveyors anticipate an increase in house sales throughout the coming year.

April saw a steady trend with five percent of professionals noting a drop in house prices, mirroring the previous month’s figures.

England is witnessing a stagnant or slight decline in house prices across nearly all regions, while Northern Ireland and Scotland are experiencing a rise in property values, the report indicates.

The rental sector is also seeing changes, with tenant demand waning, yet there remains a shortage of landlord instructions, Rics reports.

Simon Rubinsohn, Rics’ chief economist, commented: “Feedback to the latest Rics survey demonstrates the sensitivity of the sales market to interest rates at the present time, given the continuing challenge around affordability.”

He added, “A modest back up in mortgage pricing has contributed to the flatlining in the buyer inquiries metric over the past month, as well as the slightly more cautious signals around near-term expectations.”

Rubinsohn concluded with a note of optimism, stating, “That said, there is still a strong perception that activity in the market will pick up in the latter part of the year and into 2025, irrespective of any political uncertainty around the general election.”

“As far as the lettings market is concerned, an increasing number of respondents are also drawing attention to affordability constraints, and this is reflected in a more modest pace of rental growth. But a fundamental problem in the market across much of the country remains the imbalance between demand and supply with new instructions continuing to decline.”

The report emerged alongside a forecast from EY Item Club, which indicated that UK mortgage lending might see a meagre increase of just 1.5 percent (net) in 2024, as the squeeze on affordability and elevated borrowing rates dampen the appetite for home purchases.

Nonetheless, a rebound is on the horizon for 2025, assuming inflation eases and anticipated interest rate cuts materialise later in the year.

With the economy expected to pick up speed throughout this year and a potential reduction in the Bank of England base rate by summer boosting consumer confidence, housing demand is set to surge in 2025, the forecast suggests.

According to EY Item Club’s projections, the growth in UK mortgage lending is poised to more than double from the 2024 figure to 3.2 percent (net) in 2025 and maintain a steady three percent (net) in 2026.

The analysis also warns of an uptick in write-off rates on UK mortgages for 2024 and 2025, as some borrowers may struggle with higher mortgage costs affecting their repayment capabilities.

Expected mortgage write-off rates for 2025 are predicted to hit the highest point since 2015. However, thanks to low unemployment, these figures will remain below the average seen throughout the 2010s, according to recent forecasts.

A decrease in write-offs is anticipated for 2026, given that the pressure from soaring interest rates begins to weaken.

Financial Services Managing Partner at EY, Anna Anthony stated: “While we are hopefully beginning to see economic recovery in the UK, both households and businesses continue to face high borrowing costs.”

She expounded further on this, saying, “This of course has knock-on effects on bank lending, and activity in the housing market has been particularly impacted. High living and lending costs have meant fewer house purchases, and although we’re starting to see signs that activity is picking up, we expect mortgage lending growth to be very low again this year.”

Adding her expectations for the near future, she posited: “If inflation continues to fall and interest rates are cut in the coming months as expected, we believe economic recovery and market confidence will gain momentum in 2025. However, election uncertainty in the UK and in the US, alongside rising geopolitical tensions in the Middle East and Ukraine, mean potential risks to the downside remain very real.”

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