Housing market demand cooling but prices still heading upwards, say surveyors

Property professionals saw fewer new inquiries from house hunters in June, but house prices continued on an upward march, according to surveyors.

Some 27% of professionals reported a fall in interest from potential buyers, the Royal Institution of Chartered Surveyors (Rics) said.

It marked the third month in a row that interest from new buyers slipped.

London appeared to be more resilient, as 7% of professionals there reported an uptick in inquiries in the past month.

Despite a general cooling in demand in the housing market, the direction of house prices was upwards, with 65% of professionals seeing an increase.

That’s because of a lack of available properties for buyers to choose from, the report said.

Survey participants also said market appraisals are broadly unchanged compared with 12 months ago, suggesting the tight supply backdrop is unlikely to shift drastically in the immediate future, it added.

The 65% of professionals seeing prices increasing is lower than a recent high of 78% in April but remains comfortably above the long-term average of 13%, Rics said.

Looking further out, 37% foresee prices continuing to climb over the next 12 months, although this is down compared with a high of 78% recorded in February.

Some 13% of professionals have seen newly agreed house sales fall back and transactions are expected to fall further in the next three months, Rics said.

House sales are also expected to fall in the 12 months ahead. Anecdotally, professionals are preparing for economic changes to have an impact, with many suggesting that the market is starting to cool off, the report added.

Many homes are still selling at above the original asking price.

Looking at the competitiveness of the current market, half of survey participants reported that average sales prices are coming in above asking prices for properties listed at up to £500,000.

For properties priced between £500,000 and £1 million, 39% are seeing the sales price beat the asking price.

For properties listed at over £1 million, selling prices are typically coming in at slightly below the asking price on balance, the report said.

Rents are also expected to rise due to the continued imbalance between supply and demand, Rics said.

Some 36% of professionals reported an increase in tenant demand, while 11% saw a fall in the number of new landlord instructions.

And 52% predicted that rents will rise over the coming three months.

The report also included comments from surveyors.

One professional, based in Huddersfield, Yorkshire, said: “Buyer demand remains strong in all sectors but so few properties available to buy.

“Many tenants now paying more rent than the cost of a mortgage.”

Another, in Colchester, Essex, commented: “Definite cooling off of the market, air of caution from buyers.

“Still demand for competitively priced properties and starting to see some reductions in values of those on the market in order to generate interest.”

A Cornwall-based professional said: “Sales are still good, however it definitely feels like some of the heat has gone from the market.”

One in Cardiff said: “Vendors, slow to accept changing conditions and rejecting early offers, are losing out. However, properties are still selling.”

A surveyor based in Glasgow said: “The inevitable reaction to the squeeze on household budgets and rise in mortgage rates has arrived.”

And one based in Belfast said: “The market has been very strong but I noticed it has slowed down slightly in the last month.”

Rics chief economist, Simon Rubinsohn, said: “Although buyer inquiries have predictably slipped a little of late, this needs to be placed in the context of the healthy level of demand in previous months.

“A probably even more striking aspect of the latest report is the concern being voiced about the rental market.”

Jonathan Hale, head of government affairs for the UK & Ireland at Rics, added: “The latest survey points to a further decline in housing availability and rents in the lettings sector show no signs of falling.”