House Prices Rise for 1st Time in Nearly 2 Years: Surveyors

A woman walks past property details displayed in the window of an estate agent in Camden, London, on June 3, 2014. Oli Scarff/Getty Images

House prices are seeing an increase for the first time after almost two years of decline, a surveyors’ report has revealed.

The shift in the housing market was prompted by the recent decrease in mortgage interest rates. August saw the Bank of England (BoE) lower the interest rate from 5.25 to 5 percent, the first rate cut in more than four years.

Easing inflationary pressures and expected further growth are boosting sales activity and buyer demand, according to the latest RICS Residential Survey.

A higher number of surveyors—15 percent—noticed an improvement in buyer demand, while 1 percent of professionals reported prices rising rather than falling in August.

Additionally, 14 percent predict a steady increase in house prices over the next three months.

“The latest RICS survey captures an improvement in sentiment over the past month in the wake of the modest decline in mortgage rates with buyer interest improving, albeit from a relatively low base, and stock levels edging up,” said RICS chief economist, Simon Rubinsohn.

Rising demand comes amid a modest increase on the supply side. The industry expects the increase in the volume of new appraisals to grow, which improves the choice for new buyers.

Cuts and New Homes

RICS noted that with uncertainty over the trajectory of future interest rate cuts and the upcoming Autumn Budget announcements, prices need to remain realistic to get deals done.

The BoE will set the new interest rate on September 19, having previously said that it will keep a restrictive fiscal policy for as long as it takes for inflation to “sustainably” remain at the 2 percent target.

Meanwhile, the Autumn Budget is expected to include announcements of cuts in the public funds sector, following the government’s discovery of a “£22 billion black hole” in the nation’s finances.

To help end the housing crisis, Labour has launched an expert group to speed up its planning system reform. Last month, Deputy Prime Minister Angela Rayner said that 200 large sites were identified for the construction of up to 300,000 new homes.

The plans could see more than 10,000 homes built at three “stalled sites”—Stretton Hall in Leicestershire, Tendring in Essex, and Biggleswade Garden Community in central Bedfordshire.

The initiative comes as many families struggle to keep up with their mortgage and rental payments and the high cost of living.

Rental Sector

Rents are expected to keep rising in the coming months, prompted by the ongoing shortage in the market, according to 39 percent of survey respondents.

There is still a steady interest from renters, RICS said, although the pace of growth in August slowed compared to the previous months. This coincides with a sluggish supply of rental properties, as landlord instructions are falling again.

“Affordability remains an issue in the sales market even with somewhat cheaper finance now available but the picture appears even more acute in the lettings market where the amount of rental stock continues to diminish. Contributors continue to point to landlords looking to scale back their portfolios which will inevitably increase the imbalance that already exists in the market,” Rubinsohn said.

The rental market will also be affected by government plans to introduce a ban on Section 21 “no-fault” evictions by summer. The plans are part of the Renters’ Rights Bill, which was published and introduced to Parliament on Wednesday.

The “no-fault” evictions ban was first proposed by the Conservative government but was delayed owing to concerns by a number of Tory MPs that it would add “to the burden of landlords” and further “dry up” the rental sector.

Labour says that reform of the sector is “long overdue” and plans to improve the current system for both 11 million private renters and 2.3 million landlords in England.