UK Housing Market Enters 2024 With Momentum Building, Agents Say
UK estate agents are more optimistic about the sales prospects in the housing market, thanks to easing mortgage costs and expectations of a Bank of England interest rate cut, according to a survey conducted by the Royal Institution of Chartered Surveyors (RICS). The survey revealed that the gauge of 12-month sales expectations climbed 10 percentage points in December to reach its highest level (34) since February 2020.
As buyer demand shifted from negative to neutral territory for the first time since April 2022, the downward pressure on house prices also showed signs of abating, RICS reported. These findings are further evidence that the housing market is recovering after narrowly avoiding a crash last year. The competition between lenders in the mortgage market, resulting in cheaper mortgage rates, has encouraged buyers to enter the market. The recovery is already underway, with RICS stating that newly agreed sales in December were the least negative in two years.
Tarrant Parsons, senior economist at RICS, noted, Supported by an easing in mortgage interest rates of late, buyer demand has now stabilized, and this is expected to translate into a slight recovery in residential sales volumes over the coming months.
The prospect of a solid recovery in sales will be a welcome sign for a sector that heavily relies on a healthy flow of transactions. Insolvency figures released this week revealed that the real estate industry was one of the hardest-hit sectors last year, with nearly 700 companies going out of business between January and November, almost double the pre-pandemic levels.
RICS’ survey aligns with a report from property portal Rightmove, indicating that asking prices for UK homes experienced the most significant increase in eight months in January due to heightened demand after the Christmas period. Nevertheless, RICS cautioned against premature celebrations, stating that the lending climate is set to remain restrictive compared to the post-global financial crisis era, limiting the extent of the market’s recovery for the time being.
Although the average 2-year fixed mortgage rate has dropped to 5.62%—down from nearly 7% in the summer of 2022—it still remains higher than the levels seen in 2022, as reported by Moneyfacts.
While the average number of properties listed for sale with estate agents has remained unchanged, RICS pointed out that stock levels continue to be below the historical average, which could contribute to supporting prices in the coming year.
Overall, the UK housing market is showing signs of positive momentum as buyer demand stabilizes and housing prices experience a more optimistic outlook. However, experts advise caution, as the lending environment remains challenging, potentially limiting the extent of the market’s recovery for the time being.
