The number of residential properties sold over the next 12 months is set to drop by the most in at least a decade, as fears of recession and increasing interest rates adversely affect the market, according to the Royal Institution of Chartered Surveyors (RICS).
The industry body said its members had also seen the sharpest decline in enquiries from new buyers since April 2020, while property prices were rising at the slowest pace since January 2021 and were expected to level off.
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“Concerns over the economic backdrop and rising interest rates continue to take their toll on market momentum, with strong activity early in the year now giving way to a more subdued picture,” RICS economist Tarrant Parsons said.
RICS said its survey balance for sales expectations over the next 12 months – which measures the difference between the percentage of surveyors expecting a rise and those expecting a fall – fell to -45 in August from -36 in July.
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This was the lowest reading since this question was first asked in 2012.
RICS’s house price balance dropped to +53 in August from a downwardly revised +62 in July, with a lack of homes for sale placing upward pressure on prices – for now, Parsons said. The same measure of house prices for the next 12 months had dropped to just +3.
Reflecting on the latest data from RICS, Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “It’s becoming increasingly clear – and not just at the coalface – that the shortage of stock is continuing to support prices but at the same time disguising the impact of the rising cost of living on the rest of the market.
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“Another problem is that demand can disappear if not satisfied fairly quickly so prices may soften further.
“Nevertheless, we’re not seeing widespread renegotiations or buyer withdrawals so don’t expect a significant correction yet although the market is certainly more price sensitive than a few months ago.”
Tom Bill, head of UK residential research at Knight Frank, commented: “The property market paused for breath in August as more people took a summer holiday for the first time in three years so it’s difficult to read too much into the figures.
“Supply will continue to rebuild this autumn but demand will be kept in check by rising mortgage rates and a cost-of-living crisis that will get worse before it gets better. New government support measures may alleviate some of the financial pain in the short-term, but we still expect price rises to calm down as supply normalises.”
By MARC DA SILVA
Source: Property Industry Eye