UK Housing Market Cools in July: RICS Report Reveals Challenges and Opportunities

UK Housing Market Cools in July: RICS Report Reveals Challenges and Opportunities After a period of tentative improvement earlier in the year, the UK housing market experienced a slowdown in July, according to the latest Royal Institution of Chartered Surveyors (RICS) UK Residential Survey. This report offers a comprehensive look at the current state of play, highlighting both the challenges faced by the market and potential opportunities for buyers, sellers, landlords, and mortgage brokers.

Key Takeaways from the July RICS Report

• Dipping Demand & Sales: New buyer enquiries saw a modest decline in July, dropping to a net balance of -6% from +4% in June. This indicates a softening in buyer confidence. Agreed sales also experienced a more significant drop, with a net balance of -16% in July, compared to -4% in June. This suggests that fewer transactions are reaching completion.
• Regional Variations: The slowdown wasn’t uniform across the country. East Anglia, the South East, and the South West experienced weaker buyer demand compared to other regions. House prices nationally edged downwards, with a net balance of -13% for price growth. However, some areas, including Northern Ireland, Scotland, and the North West of England, bucked this trend and saw price increases. East Anglia, in contrast, recorded price declines that outpaced the national average.
• Near-Term Outlook Subdued, Long-Term More Positive: While respondents expect sales volumes to remain broadly unchanged in the short term, the outlook for the next twelve months is more optimistic, with a net balance of +8% anticipating increased sales activity.
• Limited New Listings: On the supply side, there was only slight growth in new listings coming to market, with a net balance of +9%.
• Challenges and Uncertainty Remain: Simon Rubinsohn, Chief Economist at RICS, notes the market’s continued sensitivity to price, despite the recent interest rate cut by the Bank of England. Doubts surrounding further rate reductions and uncertainty about the Chancellor’s autumn budget are contributing to this cautious sentiment.

The Rental Market: A Tale of Two Trends

The rental sector is experiencing a different dynamic. Tenant demand remained steady over the three months to July, while landlord instructions continued their decline, reaching the lowest level since April 2020. This tight supply is expected to drive up rents in the near future, with a net balance of +25% anticipating increases over the next three months. This situation may be exacerbated by the upcoming renters’ rights bill, which has prompted some landlords to sell their properties, according to Tom Bill, Head of Residential Research at Knight Frank.

Navigating the Market: Advice for Key Players

• Mortgage Brokers: The RICS findings suggest a potentially slower period for business in the short term due to decreased buyer demand and sales. However, opportunities may still exist in local markets showing resilience. Brokers should closely monitor regional trends and prepare for a potential uptick in activity if confidence improves.
• Homebuyers: While the market appears to be in a period of re-adjustment, there are signs that could benefit buyers. Lower mortgage rates, combined with increased availability of homes on the market, could lead to improved affordability. Emma Cox, Managing Director of Real Estate at Shawbrook, notes that prospective buyers should be relieved that the Bank of England’s base rate cut should keep mortgage rates stable and provide added impetus. Additionally, increased negotiating power may be available in some areas.
• Landlords: The strong tenant demand and falling landlord instructions in the rental sector present an opportunity for professional landlords. Competitive buy-to-let mortgage rates could be a catalyst for expanding portfolios, especially in a market where quality supply is limited. However, the potential impact of new tenant rights legislation should also be carefully considered.

Looking Ahead

The UK housing market faces a complex and evolving landscape. Economic uncertainty, coupled with shifts in interest rate policy and forthcoming legislative changes, will continue to shape its trajectory. While July’s data shows a cooling trend in some areas, the long-term outlook for sales remains cautiously optimistic. Understanding these dynamics is crucial for all those involved in the UK housing market to make informed decisions. Disclaimer: This blog post is for informational purposes only and does not constitute financial advice. It is recommended to consult with qualified professionals before making any financial decisions related to property or mortgages.