Housing market about to turn?
RICS released its latest UK Residential Market Survey for May 2022 today
What RICS said
New buyer enquiries indicator turns slightly negative
New instructions and sales remain more or less flat
House prices continue to rise across although twelve-month
expectations point to an easing in momentum
Twindig take
The May 2022 RICS Residential Survey reports a drop in the balance for new buyer enquiries, coming in at -7%, which is down from +8% in April 2022.
Whilst one swallow doesn't make a summer, this could be significant as it brings to an end a run of eight consecutive positive readings for buyer demand. The imbalance of supply and demand, where demand has outstripped supply, has, in our view, underpinned much of the house price growth since the start of the pandemic, and if we are seeing a turning point in buyer demand, we may also see a softening of house price inflation in the coming months.
RICS reported that the volume of sales was also slightly negative, the net balance coming in at -2% compared to -3% in April 2022. However, looking ahead 12 months the outlook for sales is much more negative with a net negative balance of -24% in May compared to -4% in April. This was the softest / most negative reading since October 2020.
New instruction volumes were flat with a 'zero' net balance in May, up from -2% in April, but market appraisals (the pre-cursor to instructions) came in with a net negative balance of -5%.
The reductions in buyer demand, supply and market appraisals suggests that the cost of living increases and mortgage rate rises are starting to bite, causing many to put their moving plans on hold whilst they appraise their finances.
Interestingly RICS members hold a positive outlook for house prices. A net positive balance of +42% expects house prices to be higher one year from now, although this is down from a peak of +78% in February and is the lowest positive since January 2021.
In lettings, demand continues to rise with a positive net balance of +48%, but landlord instructions are in decline (net negative balance of -13%), as a result, the majority expect rents to rise given the demand and supply imbalance.