RICS: UK House Prices Fall Amid Subdued but Stabilising Market Activity

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

National house prices continue to fall, but the pace of the drop appears to be stabilising, according to a UK residential market survey.

As the end of the year approaches, the Royal Institution of Chartered Surveyors (RICS) warned that residential market activity will remain subdued over the next few months.

A RICS survey for October showed that a smaller percentage of property professionals—63 percent—reported a drop in prices, compared to 67 percent in September.

This led the surveyors to suggest that the pace of decline may be steadying.

For agreed sales, the activity levels witnessed throughout October reflect the overall weak state of the market, as reported by 25 percent of property professionals.

The number of new instructions coming onto the sales market remained in the negative in October, with a net balance reading of 7 percent, compared with 15 percent in August.

“Plenty of caution remains evident with respect to both buyer and seller activity across the UK housing market, albeit the latest survey feedback points to a slightly less negative picture than that reported over the previous few months,” RICS senior economist Tarrant Parsons, said.

While it is unlikely for sales results to change for the better through the remainder of 2023, RICS expects a “more stable outlook” over the year to come.

The property market has felt the impact of consecutive interest rate hikes by the Bank of England (BoE).

First-time buyers and mortgage holders, due to reach the end of their fixed-rate deals, are faced with higher bills in line with high-interest rates.

In the latest vote, the BoE held the interest rate at 5.25 percent for the second time in a row, after almost two years of hikes.

Rows of houses in Hastings, England, on Aug. 5, 2020. Dan Kitwood/Getty Images

“Although base interest rates have now been kept on hold at each of the past two MPC meetings, the Bank of England was keen to emphasise that monetary policy is set to stay at a restrictive setting for quite some time yet,” said Mr. Parsons.

He suggested that this will impact mortgage affordability. It will remain “stretched over the near-term, leaving little prospect of a strong rebound in residential sales volumes,” Mr. Parsons said.

Lettings

Across the lettings market, there was a modest increase in tenant demand in the three months to October. RICS reported that 33 percent of respondents noted the growth, albeit being the worst reading since the 59 percent figure in the second quarter of 2021.

At the same time, landlord instructions—or new rental properties entering the market—remained in the negative, at 18 percent, compared to 28 percent recorded in July.

Around 53 percent of respondents predicted that rental prices would increase in the next three months. This is an ease on the record high reading of 61 percent in the third quarter of 2023.

Data by the Office of National Statistics (ONS) showed that private rental prices rose in the UK by 5.7 percent. This is compared to the 5.6 percent in the 12 months to the previous month of August.

Over the next year, rents are projected to grow by around four percent on average across Britain.

RICS senior public affairs officer, Dominic Collier, warned of many challenges that remain persistent in the housing market.

“More homes need to be built in the right places, and more of them need to be affordable. Existing homes require more support to improve their energy efficiency, to reduce their bills and help tackle our net-zero targets,” he said.

The government plans to legislate the Renters (Reform) Bill, as announced in the King’s Speech on Tuesday. The bill will upgrade the private rental sector and improve renting for the long term.

“The King’s Speech earlier this week provided a unique opportunity for the government to reaffirm its housing agenda. A focus was placed on addressing challenges related to no-fault evictions for renters and re-possession for landlords. Long-term persistent issues surrounding leases will also be addressed,” Mr. Collier said.

RICS plans to work with the government to address the challenges and opportunities in the sector.