Homebuyer enquiries fell at the sharpest rate since the early stages of the pandemic last month, as the cost-of-living crisis took its toll on the UK property sector.
According to the RICS residential market survey, enquiries, sales and new instructions all dropped at steeper rates in August than in the previous month.
In terms of new buyer enquiries, it was the fourth consecutive month of negative readings, falling to -39% from -26%. This represents the weakest return for the buyer demand gauge since April 2020.
Agreed sales showed a net balance reading of -22% during the period, a fall from the -13% seen in the previous report. Sales have now fallen for five consecutive months, with the latest feedback implying this downward trend is becoming further entrenched.
Sales predictions for the three months ahead also slipped further into negative territory, while expectations for 12 months ahead are the most downbeat they have been since the series began in 2012.
The data also revealed that average stock levels on estate agents’ books were pushed to an all-time low of 34 homes per branch.
“This lack of supply has been a crucial factor in underpinning growth in house prices,” RICS said.
A net balance of 53% of respondents reported an increase in house prices during August, down from 62% in July, but comfortably above the long run average of 13%.
However, 12-month price expectations have now eased in each of the last six months, from a net balance reading of 78% back in February to a figure of 3% in the latest results.
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In the lettings market, tenant demand also continues to rise, with a headline net balance of 50% of contributors seeing an increase in tenant demand over the month.
The latest net balance for landlord instructions came in at -13%, with falling supply across the rental market an ongoing theme over much of the past five years.
Given this excess of demand over supply, rents are expected to rise in the near-term.
When viewed over the next twelve months, rents are anticipated to rise by close to 4% at the national level.
“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,” Tarrant Parsons, senior economist, said.
“Moreover, given projections for the UK economy point to a potential recession emerging towards the end of 2022, respondents envisage housing sales continuing to slip in the coming months.
“For the time being at least, the lack of stock available on the market is still providing support to house prices, which continue to rise, even if the pace of growth has cooled over recent months.”
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