Housing demand still weak as mortgage affordability remains ‘stretched’, says RICS

Housing demand remains weak and is likely to remain so, according to a report from the Royal Institution of Chartered Surveyors.

According to RICS’ monthly UK Residential Market Survey, more surveyors reported a fall than a rise in new buyer enquiries in September, with a net reading of -39%, while agreed sales stood at -37%. 

While weak, these latest readings were marginally less negative than in August’s survey. 

RICS senior economist Tarrant Parsons said: “With mortgage affordability still incredibly stretched, it is unsurprising that buyer activity across the housing market remained subdued in September.  

“Although the decision to pause monetary policy tightening a few weeks ago provided a glimmer of relief for the market, interest rates are likely now set to remain on hold for a prolonged period.  

“As such, it appears there is little prospect of trends deviating much from the recent picture in the immediate future.  

“That said, the outlook a little further ahead has improved slightly, with twelve-month sales expectations moving out of negative territory for the first time in several reports.” 

Respondents continue to predict a decline in sales volume, although the latest net balance moved to -24% from a more positive reading of -36% for the prior month. 

Annual sales expectations turned positive, however, with a net balance of +3%, with respondents noting the interest rate rise freeze as having contributed to the more positive picture. 

House prices remained on a downward trajectory at the national level, with September’s figure (-69%) barely changed from the month prior – near term expectations point to a continuation of this trend.

The survey comes after the launch of RICS’ manifesto for the built environment, which it was promoting at the UK political party conferences. The document calls for the next government to hit housing targets by setting a housing strategy to increase the supply of rented homes.  

Consultant Currie & Brown published its own market report this week, which focused on the construction sector’s ability to achieve net zero. 

The firm said the sector was being hindered in meeting targets by a lack of clarity around sustainability standards, noting the more than a dozen national definitions of zero carbon for buildings. 

It proposed that the industry work collaboratively to develop a common approach and also criticised the government’s recent decision to delay climate policies. 

“Extending targets can help relieve pressure on the construction industry and property sector,” said Adam Mactavish, global director of sustainability at Currie & Brown.

“However, a question mark hangs over the necessity of these delays, in particular reducing obligations on landlords to improve energy efficiency will mean that occupiers and the nation remain more exposed to future energy price shocks.  

“Surely it is right to reduce demand now, rather than subsidise avoidable consumption into the future.”