The housing market continues to strengthen, according to the latest Royal Institution of Chartered Surveyors (RICS) UK residential market survey for October 2024.
The latest data reveals that house prices overall also continued to rise (+16% net balance). All regions report price growth apart from Yorkshire and the Humber, and the South West, with figures indicating decreasing prices (-23% and -4%, respectively). The perception of rising prices across most of the UK is supported by new buyer enquiries registering a +12% result in October. This extends a run of growing demand to four successive months.
Looking to the future, a rising share of respondents believe that house prices will continue to rise over the next three months, with this indicator moving to +20%, which is up from +12% in September. Virtually all parts of the UK are expected to see a rise in house prices in the year to come, led by firm growth across Northern Ireland and Scotland.
Unfortunately, the chasm between the supply of properties available for let and rising public demand continues to expand. A net balance of +19% reported increasing tenant demand over the three months to October. At the same time, landlord instructions, which is the metric measuring landlords making their property available for rent, fell over the same timeframe. This is evidenced by a net balance reading of -29%, which is its weakest reading since the end of 2021. Unsurprisingly, a net balance of +33% of respondents expects rental prices to be driven higher over the coming three months, due to this mismatch between supply and demand.
Much of the results for October were impacted by respondents waiting to see what would be announced by the Chancellor in the Autumn Budget. The announcements have led to rising bond yields, which could potentially negatively impact the market going forward, whilst respondents in several regions note the importance of “competitive pricing” to support sales activity. Woes for renters persist as rental properties continue to disappear from the market and demand remains resilient in most regions.
RICS president, Tina Paillet, said: “The growth in residential sales could be further supported by recent interest rate announcements by the Bank of England. Meanwhile, the pending expiration in the higher stamp duty threshold in spring 2025 may cause homeowners and first-time buyers to rush to take advantage of the current rate, but this will likely be followed by a weaker trend after the deadline has passed.
“Our data continues to indicate that renters are feeling the pressure from a limited supply of rental properties and rising rents. While the Autumn Budget announcement of immediate stamp duty increases for landlords acquiring rental properties may increase opportunities in supply for owner-occupiers, it will make it more challenging to address the critical shortage of rental homes.”
The head of market analysis at RICS, Tarrant Parsons, commented: “The UK housing market saw a continued pick-up in activity through October, with the recent improvement in buyer demand translating into growth in the number of sales being agreed. Just as importantly, forward-looking sentiment points to this brighter trend remaining in place of the coming months. That said, the rise in bond yields following the Budget, alongside a general increase in financial market implied interest rate expectations over the past couple of weeks, will likely present something of a headwind for the market to contend with over the short term.”
Responding to RICS’ latest UK residential market survey, Tom Bill, head of UK residential research at Knight Frank, shread his thoughts.
He said: “The Budget removed some uncertainties for buyers and sellers but created others. While there is now clarity around stamp duty and capital gains tax rates, we expect house prices and transaction volumes to come under pressure due to rising mortgage costs. While we don’t know how successful Labour’s revenue-raising plans will be or the exact shape of the economic policies pursued by the new US president, the trajectory for borrowing costs is unclear.
“Tenants may end up bearing the brunt of the government’s Renters Rights Bill if more landlords decide to sell up, which would put upwards pressure on rents. Interventions in the housing market have a well-established track record of unintended consequences and this piece of legislation may prove to be no exception.”
