Demand from UK homebuyers weakened in February as uncertainty surrounding interest rates dented confidence, according to the latest survey from the Royal Institution of Chartered Surveyors (RICS).
The organisation’s monthly sentiment survey suggests activity remains sluggish, with many potential buyers adopting a cautious approach while they wait to see what happens with inflation and mortgage costs. The longer-term outlook is more positive, however, with a third of surveyors (33%) expecting prices to edge higher over the next 12 months. Nearly one in five (17%) of surveyors predict that transaction levels will increase over the next 12 months.
The short-term picture is less stable, however, with new buyer enquiries down again in February, and agreed sales also cooling.
Tarrant Parsons, head of market research and analytics at RICS, said: “February’s survey highlights renewed volatility in the market. While activity indicators at the start of the year suggested a tentative improvement, the deterioration in the geopolitical backdrop has clearly weighed on confidence.
“The recent rise in oil and energy prices has also increased the likelihood that mortgage rates will remain higher for longer. As a result, near-term expectations have softened. Although the twelve-month outlook remains positive overall, maintaining that trajectory will depend on the recent spike in inflationary pressures easing in the months ahead.”
House prices remain broadly steady
UK house prices saw little movement overall in February, the survey found. The national price indicator registered -12%, only slightly weaker than the previous month. However, there are significant regional differences, with surveyors in London, the South East England and East Anglia reporting the strongest downward pressure on prices. By contrast, markets in Northern Ireland, Scotland and the North West England were still seeing greater price stability.
Looking ahead, although they are positive about the 12-month outlook, surveyors have become more cautious about the short-term outlook for prices. Expectations for the next three months slipped to -18%, compared with -6% in January.
Turning to the rental sector, there continues to be a shortage of available homes. Tenant demand was broadly unchanged over the past three months, but the supply of rental properties fell further as landlord instructions remained strongly negative. As a result, one in five survey respondents (20%) expect rents to increase over the next three months.
