UK estate agents report falling demand for new homes


British estate agents reported a sudden drop in applications for new homes last month, according to a closely watched survey which indicated heat could emerge from the housing market after two frantic years.

The monthly UK housing survey by the Royal Institution of Chartered Surveyors, released on Thursday, found the net balance of buyer inquiries was -7% in May, compared with +8% the previous month.

The figure, which shows more agents reporting a drop in buyer inquiries than an increase, adds to evidence that the housing market is starting to calm down as the cost of living crisis and rising rates interest limits purchasing power.

“The rising cost of mortgage funding as well as growing concerns about the economic outlook are unsurprisingly having an impact, albeit relatively modest at this stage, on buyer activity in the sales market,” said Simon Rubinstein, Chief Economist of RICS.

Annual property price growth has remained in double digits over the past two years as the government’s stamp duty holiday, low borrowing costs and the search for more space have protected the property market from an economic blow of the pandemic.

But with 9% inflation and rising mortgage rates, many real estate agents said the boom was soon to end.

“The cost of living, inflation, the war in Ukraine and confidence in government are some of the factors contributing to doubt,” said William Delaney, an agent in central London. “That makes some buyers very hesitant.”

Separate figures from Halifax Bank released on Wednesday showed annual house price growth remained high but slowed slightly in May, falling to 10.5% from 10.8%.

Russell Galley, chief executive, said the market had started to “show signs of cooling” as mortgage activity slowed. “With overall buying demand down from last year, we may have passed the peak of the sellers’ market,” he said.

However, a shortage of homes for potential buyers could continue to drive up house prices, he added.

The RICS survey also showed that estate agents believed prices would be ‘pushed higher’ by a shortage of homes, but hinted at diminished confidence that such increases would continue in the future.

A net 73 percent of respondents said house prices rose in May, a similar proportion to previous months. But the net balance that predicted higher house prices a year from now fell to 42% from 78% in February, the lowest figure since January 2021.

The RICS net balance of opinion of estate agents is calculated as the proportion of those reporting an increase in prices minus those reporting a decrease.

A mismatch between supply and demand is also fueling higher prices in the rental market, agents say.

A net balance of 48% of respondents said tenant demand continues to rise, but fewer new properties are coming to market, and a net balance of more than 50% expect rents to rise.

“Demand is still very strong, resulting in higher rental levels and greater challenges for tenants who are unable to compete for available inventory,” Rubinstein added.


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