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    RICS: Estate agents say house prices are up for first time in two years

    By Katie Williams,

    6 days ago

    https://img.particlenews.com/image.php?url=45prsf_0w14VAv100

    The first signs of life could be returning to the UK housing market, despite ongoing affordability pressures. Estate agents say house prices are rising for the first time in two years as buyers and sellers gradually return to the market.

    In September’s survey from the Royal Institution of Chartered Surveyors (RICS), a net balance of +11% of respondents said house prices were rising. This is the first time the figure has been positive since October 2022, up from 0% in August.

    It is worth noting that the RICS survey is a sentiment survey rather than an actual house price index , however sentiment is still an important driver of markets.

    The RICS survey looks at how positive or negative respondents are across a range of questions, and then uses their responses to calculate net balance figures (the number of positive respondents minus the number of negative respondents).

    The improvement in sentiment in recent months is perhaps unsurprising given borrowing costs are gradually starting to come down. Mortgage rates remain high compared to their long-term history, but the Bank of England’s base rate cut on 1 August has prompted lenders to slash their rates in recent weeks.

    Buyers and sellers are returning to the market as a result. A net balance of +14% of respondents reported an increase in new buyer enquiries in September, broadly in line with +16% the month before. This is the third month in a row where the figure has been positive.

    Sales sentiment has also turned positive over the past two months. A net balance of +5% of respondents said sales were up in September, broadly in line with a reading of +6% in August. Both figures are up from -2% in July.

    Momentum could continue to pick up over the longer term too. A net balance of +23% of respondents believe the sales market will continue to grow over the next three months. This increases to +45% over the next 12 months.

    “The latest survey results once again convey a brighter picture for housing market activity, with the recent easing in mortgage interest rates continuing to support a recovery in buyer demand,” says Tarrant Parsons, head of market analytics at RICS.

    “Critical for the outlook, a further unwinding in monetary policy is anticipated over the months ahead, which should create a more favourable backdrop for the market moving forward,” he adds.

    Despite this, homeowners should remember that house prices are “increasing against a lower benchmark from 2022 following the adverse market reaction to Liz Truss’s ill-advised Budget,” says Tomer Aboody, director of specialist lender MT Finance.

    The average UK house costs £290,000, according to the latest data from the Office for National Statistics (ONS). That is £5,000 lower than the figure that was recorded in November 2022.

    Renters face rising costs as buy-to-let landlords sell up

    The RICS survey paints a less positive picture for renters. Tenant demand continues to outstrip housing supply, pushing rental costs higher. The effects of this could be exacerbated going forward as the buy-to-let market becomes less profitable for landlords, prompting many to sell up.

    Tax breaks have already been scaled back in recent years, and a 3% stamp duty surcharge was introduced on second homes in 2016. Now, a possible capital gains tax hike in the upcoming Budget is prompting many landlords to list their properties for sale in the hope of cashing in their gains as soon as possible.

    The government is also introducing new legislation to improve renters’ rights, and some landlords believe this will erode their profits further.

    Greater protection is good news for tenants but it could end up being a double-edged sword if housing supply dwindles as a result. A net balance of +22% of RICS respondents said tenant demand increased in September, while -29% reported an increase in landlord instructions.

    “While the Renter’s Rights Bill aims to improve standards and offer better protections for tenants, we must ensure that these reforms do not discourage responsible landlords from remaining in the market,” says RICS president Tina Paillet.

    “Most importantly, the planned changes in the private rental sector fall short of tackling the core issue: increasing supply and making housing more affordable for tenants,” she adds.

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