Higher interest rates weigh on UK housing market - RICS
By Abigail Townsend
Date: Thursday 08 Jun 2023
(Sharecast News) - The UK housing market saw a modest recovery in May, a closely-watched survey showed on Thursday, although rising interest rates and stubborn inflation continued to weigh heavily.
According to the latest RICS UK Residential Market survey, there was an improvement in both demand and agreed sales in May.
While the net headline balance for new buyer enquiries remained in negative territory, at -18, it was up significantly on April's -34. The agreed sales indicator rose to -7 from -18 a month previously, and from -29 in March.
House prices continued to fall, with a net balance - the difference between the percentage of surveyors seeing rises and falls in prices - of -30. But that was well above February's low of -46 and an improvement on April's -39.
It was also better than expected, with analysts looking for a net balance of -38.
However, the Royal Institute of Chartered Surveyors continued to sound a note of caution. Tarrant Parsons, senior economist, said: "The latest feedback indicates a modest recovery in the sales market activity, with generally less negativity compared to the end of 2022.
"However, it seems storm clouds are gathered, with the UK's stubbornly high inflation likely undermining the recent improvement in activity by prompting the Bank of England to take further action through interest rate rises, leading to higher mortgage rates and ultimately reducing affordability and buyer demand."
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: "On the face of it, the latest RICS survey suggests demand is starting to stabilise, albeit at a low level.
"Looking ahead, we continue to think that house prices will not stabilise until they have fallen about 8% from their peak, as only then will monthly mortgage payments for new buyers probably have fallen to levels needed to balance demand and supply for properties."
The RICS survey coincided with interim results from house builder Crest Nicholson, which posted a slide in profits and warned that higher interest rates would hit the property market. And on Wednesday, Halifax said house prices had fall 1% year-on-year in May, the first such fall since 2012.
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