The November 2022 RICS UK Residential Survey results have revealed that overall activity continues to weaken across the sales market, with higher interest rates and a difficult macroeconomic outlook both taking their toll on buyer sentiment. 

As a result, house prices have begun to fall according to the latest feedback, a trend that is expected to continue over the near-term at least. Looking at buyer demand, the headline net balance for new buyer enquiries came in at -38% in November, marking the seventh successive negative monthly reading for this indicator. 

Although the latest reading is not quite as downbeat as the -53% seen last month, it still suggests momentum behind purchaser demand remains weak. For agreed sales, a national net balance of -35% of respondents reported a decline over the latest survey period. Again, this is marginally less negative than the reading of -45% posted in October, but continues to signal a contraction in sales volumes, nonetheless. Moreover, respondents across all parts of the UK cited a decline in agreed sales, the second consecutive month in which this has been the case. 

Going forward, the three and 12-month sales expectations series returned net balances of -44% and -38% respectively, with both pointing to a further fall in sales activity. 

Prices are reportedly retreating across most parts of the UK, with the latest feedback especially downcast in the South East and South West of England. For now, prices continue to edge higher in Scotland and Northern Ireland, albeit the pace of growth is significantly softer than earlier in the year. 

In the coming 12-months, an aggregate net balance of -61% of contributors foresee a further decline in house prices, down from an already weak reading of -48% last month. Virtually all parts of the UK exhibit negative price expectations for the year ahead, with projections being downgraded between the October and November survey results in most cases. 

In the lettings market, tenant demand continues to rise, evidenced by a net balance of +35% of respondents reporting a pick-up in November. At the same time, a net balance of -27% of respondents highlighted a decline in landlord instructions, putting further upward pressure on rents. Unsurprisingly, a net balance of +43% of contributors anticipate rental prices moving higher over the coming three months, although this has somewhat moderated from a recent high of +66% back in February this year.

Surveyor comments – Sales

Yorkshire and the Humber 

Alex McNeil, at Bramleys in Huddersfield, says there has been a “slowdown in activity in November, which may in part be seasonal, although it is likely the market is in transition. Developers are reporting lower reservations and signs of discounting.” 

However, McNeil adds: “Few sales have fallen through and the market for houses in the best areas are likely to be more resilient.”

East Midlands

Peter Buckingham, at Andrew Granger & Co in Market Harborough, says: “As mortgage interest rates settle down to what may be “the norm”, confidence is beginning to flow back into the market. However, sellers will wait in the hope that the market may pick up as it traditionally does in the first quarter of the New Year. The market is desperate for fresh stock.”

West Midlands

Colin Townsend, at John Goodwin in Malvern, comments that there are “definitely signs that the troubles in the economy are now impacting sales in the housing market. Many more chains are breaking, everything is taking longer to sell and prices are starting to fall. More challenging times lie ahead.”

East Anglia

Mark Wood, at Blues Property in Cambridge, states: “The economic situation has more or less stopped new market activity. Sales already agreed with fixed rate mortgages agreed prior to interest rate rises are still progressing, although price renegotiation is necessary to keep some sales together.”

South West

James Mckillop, at Savills in Salisbury, says: “The gap between a vendor’s expectations and a buyer’s sense of opportunity to take advantage of a slowing market is always a challenge. The market fundamentals still seem strong with buyer registrations higher in October 2022, than in October last year.”

Scotland

Grant Robertson, at Allied Surveyors Scotland, says: “Following a period of relative stability in the wake of the Autumn statement, the market has been resilient against considerable deflationary factors conspiring to drive down prices. The continuing supply/demand imbalance is helping maintain the market, but for how long?”

Regarding the rental market in Scotland, Robertson added: “The nonsense of recent legislative changes imposed by the Scottish Government continue to cause havoc in the PRS sector with a noticeable minority of landlords using the continuing strength of the sales market to exit whilst they can. Where the supply levels (of rental properties) will sit when this works through is concerning.”