According to the Royal Institution of Chartered Surveys, UK estate agents are bracing for the cost of living crisis and Bank of England rate hikes to dampen some of the heat in the housing market.
The warning came amid a survey that found activity remained buoyant in April, with house prices continuing to rise across the country amid a shortage of homes for sale that shows no signs of slowing.
Forward-looking indicators have softened, however, RICS said. Overall, agents expect sales to decline over the coming year and expect prices to rise less sharply than expected in February.
Mortgage lenders are following the Bank of England in raising interest rates to historic lows, adding to the strain on household budgets inflicted by the worst surge in inflation since the 1980s.
The risks to the outlook were underscored this week by a grim report from the National Institute for Economic and Social Research, which predicted the economy would slide into recession and unemployment would rise. The BOE expects inflation to top 10% in October.
With housing stock levels so low, RICS said the loss of momentum in the housing market should be modest.
“For now at least, while there is a great deal of caution about the future economic landscape, it appears that the limited supply available in the market, coupled with steady growth in demand, remains the main driver of prices for real estate,” RICS said. Economist Tarrant Parsons.
In a bad sign for future supply, RICS said the number of reviews undertaken by potential sellers was little changed from 12 months ago.
Tom Bill, head of residential research at estate agent Kinght Frank, said buyer demand is now ‘robust rather than fierce’ but potential sellers are staying put as they are unable to find a place to buy .
“We expect to see a single-digit annual figure rather than a double-digit figure [price] growth by the end of the year as inventory levels and mortgage rates increase,” he said. “Although the cost of living squeeze will also intensify, we are not factoring in a recession.”
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