“Interest rate uncertainty” in the second half of the year has seen home buyer enquiries fall to their lowest level in seven months, according to new data released by the Royal Institution of Chartered Surveyors.
The body’s UK Residential Market Survey revealed that, among surveyors, new buyer enquiries stood at a net balance of -8%, down from -1% in April, which was the lowest reading since November.
South East and South West of England experienced the largest falls, dropping -27% and -23%, respectively.
The survey states: “This appears to be linked to the recent scaling back in expectations around the degree of monetary policy loosening likely to be pushed through by the Bank of England during the second half this year.”
House price growth fell to its lowest level since the start of the year, falling to a net balance of -17% compared to -7% in April.
There was also a fall in the number of sales agreed, with figures slumping to a net balance reading of -13%, down from +4% the previous month.
The survey says: “Having held broadly steady in both March and April, the latest reading — being the most negative return since January — suggests that house prices fell slightly during the month.
“That said, while prices pulled back to a certain degree in virtually all regions of England during the latest survey period, Scotland and Northern Ireland continue to see a very different picture, with prices remaining on an upward trajectory in both cases.”
The report does offer some optimistic signs, with new home listings rising to a net balance of +16% in May, making it the sixth rise in as many months.
Tenant demand “appeared to regain some momentum” with the net balance rising to +35% in May, compared to +10 in April.
Rental prices are expected to continue rising, although growth rates are likely to be more modest compared to the previous 18 months. The current net balance stands at +35% and is notably more moderate than the +53% average reported throughout 2023.
Shawbrook managing director Emma Cox says: “Another disappointing month for the property market after what had been a positive start to 2024 according to RICS’ latest residential market survey.
“Demand dipped with sales expectations softening further. However, sales activity is expected to pick up later this year with 12-month predictions painting a more positive picture which should give investors and buyers some cause for optimism.
Cox adds: “While an interest rate cut from the Bank of England ahead of the general election is unlikely, many will be hoping that the next week will bring with it clarity for the future of the market as the main political parties lay out their manifestos.
“Until then, there are still deals to be had for professional landlords looking to bring more, much-needed quality stock to the private rental market.”
North London estate agent and former Rics residential chairman Jeremy Leaf points out: “On sales, we saw very little pause in the recent increase of market activity at the time of, and immediately after, the election announcement.
“Our buyers and sellers were telling us they regarded the outcome as a foregone conclusion and saw little difference in the two main parties’ housing policies.
“However, reality seems to have ‘kicked in’ over the past few weeks, not so much due to the likely election result but lingering doubts about the strength of the economy and the pace in the expected drop-in mortgage rates.
Leaf adds: “Buyers are broadly in control, so prices are dropping a little and transactions lengthening but keenly priced homes are still attracting the most attention.
“For lettings, we might have expected the recent fall in letting instructions prompted by more landlords leaving the sector partly in response to regulatory issues, to support higher rents but the reverse has been true.
“The quantity and quality of tenants has reduced, and rents are softening as tenants are refusing to pay more while cost-of-living worries remain.”
