The UK housing market continues the trend of being generally downbeat, but there are several indicators demonstrating a more stable picture emerging through the course of 2023, the Royal Institution of Chartered Surveyors (RICS) believes.
RICS’ Residential Market Survey for February 2023 has shown that new buyer enquiries rebounded to a net balance of -29%, improving from -45% in January. RICS noted that while this metric is still signalling a decline in demand – the 10th consecutive negative monthly reading for new buyer enquiries, it is also the least negative result since July last year.
The new sales indicator was also less negative in February, improving from a net balance of -36% to -26%. However, the average time taken to complete sales continues to rise and is now approaching 19 weeks. In its latest Residential Market Survey, RICS also found that in the mainstream market, which covers prices up to £500,000, around 60% of respondents suggested that prices were being agreed at below the asking price. For properties priced between £500,000 and £1 million, the proportion jumped to just over 70%.
Tarrant Parsons, senior economist at the Royal Institution of Chartered Surveyors, said, “The housing market continues to adjust to the tighter lending climate, with stretched mortgage affordability still weighing heavily on activity. Given the ongoing weakness in demand, house prices remain on a downward trajectory, and are expected to see further falls through the first half of the year at least. Going forward, near-term expectations suggest market activity will remain generally subdued over the coming months, although the latest survey feedback shows tentative signs that the ongoing decline in buyer enquiries is now moderating.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said, "the latest figures confirm that the housing market continued to slow and became more price-sensitive in February but showed few signs of a correction. Worries about the cost-of-living and availability of mortgages mean homes are taking longer to sell and keeping prices in check. However, recent falls in lending rates, inflation, and increasing property choice is contributing to a readjustment in the previously severe imbalance between supply and demand which we expect to continue into the spring.”
Sam Rees, RICS’ senior public affairs officer, added, "that they were emphasising ahead of the spring budget the critical role housing has to the UK economy, and the need to boost supply through new builds and commercial property conversions where appropriate, while conforming to the strictest standards. RICS supports efforts to improve the energy efficiency of homes and the continuation of the government’s Energy Price Guarantee. Further fiscal intervention for consumers and businesses is required to scale up the retrofitting of UK homes, and we welcome initiatives such as ECO+ that go some way in delivering such needs.”
RICS survey also looks at the current state of the lettings market In the UK lettings market, a net balance of +32% reported a continuing increase in tenant demand, while landlord instructions continue to decline, although at a lesser pace than in the recent months at -13%.
Given the supply-demand imbalance, the rent expectations reading remains at a relatively high level of +45%.
Jeremy Leaf, also commented, “supply is slowly improving partly in response to last year’s sharply rising rents, but is still not sufficient to meet demand, particularly for one- and two-bedroom flats. On the other hand, we’ve also seen concerns about the cost-of-living keeping a lid on spiralling rents. Tenants may be increasingly feeling the pinch, but many landlords believe they have no option but to increase rents to meet higher mortgage repayments and/or building costs in particular.”
Sam Rees, meanwhile, stressed that, "with rising rents and diminishing housing stock in the private rental sector, the government must do more to support landlords who are leaving the market due to increasing cost and regulation challenges. Landlords continue to raise concerns with RICS on the lack of clarity and financial support from government to meet expensive energy efficiency improvement targets which is further pressuring landlords into exiting the sector. RICS would also encourage the government to restore the Local Housing Allowance to the 30th percentile to support those private renters who are struggling with rising rents.”
In detail, Goodlord says there was a significant reduction in the average void period for a rental property in England during February. The England average dropped by over a quarter from 23 to 17 days, highlighting strong demand amongst tenants. The biggest change came in the North West, where voids went from 27 days in January to just 18 days in February - a steep drop of a third. The East Midlands also recorded a decrease of more than 30% with void periods in the region going from 29 days to just 20, a 31% reduction.
Greater London, the North East, South East and the West Midlands all saw voids reduce by more than 20 per cent. The smallest change was recorded in the South West, where voids decreased from 21 days to 19 days - a 9.5% decrease. The new average void period for England of 17 days is the lowest since September 2022, when void averages hit 15 days.
Meanwhile rents across most regions in England rose during February, taking the average cost of a rental home to £1,089.04 - a rise of one per cent on January’s figures. Whilst this is still far below figures from last year, when prices peaked in September 2022 at a record £1,249.81 per property, February’s figures are the highest rental averages recorded since October 2022.
The biggest increase in the average cost of rent during February was seen in the North East, where prices rose by three per cent. In contrast, both Greater London and the South West saw fractional decreases in the cost of rent. Year on year, the cost of rent is now up by 12.5%.Tom Mundy, the chief operating officer of Goodlord, said, “December and January are traditionally slightly quieter times for the lettings market and, given the intense demand the rental sector has seen over the last year, I’m not surprised to see how pace has increased during February. The big drop in voids is a clear reminder that housing stock is low and tenants are moving quickly to secure properties - everything listed is getting snapped up extremely quickly. This is linked to the renewed increase in rental costs. Although we’re not at the cost averages we saw during last summer and early autumn, the price per property averages are significantly higher than this time last year. These trends are being intensified by a rise in landlords leaving the market, pointing to an urgent need for decision makers to incentivise landlords to stay in buy-to-let whilst ramping up house building efforts. We believe the industry is facing unsustainable pressures and repeat our call for the Government to rapidly take meaningful action to help landlords and tenants alike.”
Rents up slightly across UK … except for London.
The average rent in the UK is now £1,175 per calendar month according to HomeLet. This is a tiny 0.3% up on a month ago. When London is excluded, the average rent in the UK is £983 pcm, up 0.6 per cent from the previous month. Northern Ireland saw the largest monthly variance, experiencing a 1.8% increase from last month, with average rents rising to £786 pcm.
London rental prices continue to drop as the region saw the most significant monthly decrease, with rents falling by 0.7% dropping below their previous average to £1,975 pcm. Commenting on the latest data, Andy Halstead - HomeLet and Let Alliance chief executive - said, “a small decline in rental prices at the start of 2023 has not continued, with the average rental property in the UK again seeing a price rise. Something interesting is happening in the capital, though, as the average rent in Greater London has decreased for the third month in a row, having briefly climbed above the £2,000 pcm mark in November for the first time ever. It is still a little early to predict whether this will be a sustained pattern or whether London will follow the pattern of the wider country and see prices rise again in the coming months. As a wider point, the rental market continues to suffer from a lack of available properties to meet surging demand, with many landlords choosing to leave the market. If the number of properties available fails to increase in line with demand, then prices will inevitably remain high and climb even higher as the battle between tenants to secure a property intensifies.”