Thursday, May 12, 2022

House prices in the UK are showing little sign of slowing down despite fears of a crash, the polls show

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Rics’ Residential Market Survey of real estate professionals showed a net balance of 10% in April, reporting an increase in inquiries from new buyers rather than a decline

A limited supply of available property and ever-growing demand from buyers remain the key drivers of house prices, the Royal Institution of Chartered Surveyors (Rics) said.

Experts say there is “little evidence” that the pace of house price growth is sharply losing momentum despite rising cost of living.

Property prices have recently surged to a series of record highs despite the difficult economic conditions brought on by the coronavirus pandemic and the cost of living crisis, with inflation expected to hit 10% later this year.

Rics’ Residential Market Survey of real estate professionals showed a net balance of 10% in April, reporting an increase in inquiries from new buyers rather than a decline. It was the eighth straight month that the survey showed a net positive balance.

However, looking at the supply of available homes, slightly more professionals reported a drop in new home listings compared to those who reported a spike in new listings in April. Overall, this indicated a flat trend in new homes coming onto the market.

The number of agreed sales also remained broadly flat in April after rising in the previous two months. With a view to the coming year, unchanged sales are expected.

Because of the demand-supply imbalance, inventories remain extremely low, averaging 38 properties per agency, Rics said.

The number of reviews performed has also changed little compared to 12 months earlier, which doesn’t seem to bode well for delivery flow, the report added.

Around 80% of professionals reported an increase in property prices in April, up from 74% in March.

Experts assume that prices will continue to rise. Looking ahead next year, 62% expect price increases, although that’s down from 78% in the February survey.

The number of rental properties available is also declining as tenant demand increases.

The longstanding imbalance between supply and demand means that rents can be expected to rise again. Notably, 63% expect rents to rise in the next three months – the highest proportion since records began in 1999.

Last week, the Bank of England forecast consumer price inflation would top 10% in the final quarter of this year as rising prices for energy and other imports would cause the second-largest drop in living standards in over 50 years.

The BoE has raised interest rates four times since December and financial markets expect rates to reach at least 2% by the end of the year, double their current levels.

However, the impact of rising prices is being felt unevenly. Many wealthier households have still accumulated significant savings during the COVID-19 pandemic, when spending options have been limited and working from home has spurred demand for more spacious homes.

Commenting on the survey results, Rics economist Tarrant Parsons said: “Despite mounting macroeconomic headwinds in the form of cost of living pressures and higher interest rates, the UK housing market continues to show modestly positive trends in terms of new buyer enquiries.

“For now at least, while the future economic landscape is very cautious, it appears that limited supply in the market coupled with steady demand growth are still the main drivers of house prices.

“Therefore, at this stage, there is little evidence that house price inflation is losing much of its momentum, while expectations for the coming 12 months have eased only slightly from recent highs.”

Jeremy Leaf, a north London estate agent and former RICS Chair for Residential Property, added: “The RICS survey has proven to be historically accurate for what is happening on the ground and in the near future.

“These numbers confirm what we’ve been seeing – lower quantity but higher quality of enquiries, resulting in strong but fewer sales and slightly longer transaction times as movers no longer feel the hot breath of competing buyers on their necks. Inventory levels are improving slightly, but not fast enough to keep up with demand, particularly for single-family homes, so prices are still rising, albeit not as fast.

“Looking ahead, we don’t expect too many changes, especially as higher living costs and interest rate pressures remain a priority for many.”

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