Agency stock rises as demand and sales drop - RICS

High borrowing costs and an uncertain economic outlook remaining the main challenges for homebuyers, the Royal Institution of Chartered Surveyors (RICS) has warned.

The latest RICS Residential Market Survey for April suggests that the market continues to struggle although the longer-term outlook is more positive.

Its latest report found new buyer demand, in terms of net balance, dropped in April to -37% from the -30% recorded in March.

However, most of the survey’s indicators have improved slightly from the lows hit towards the end of 2022.

The indicator capturing agreed sales for April returned a net balance of -19% up slightly from -30% last month. This represents the least negative reading since July 2022.

In terms of supply, survey respondents cited an overall flat picture for new instructions during April, with the net balance declining slightly to -4% from -6% in March.

The recent decrease in demand and sales has resulted in a slight increase in the average number of properties held on estate agents’ books, with 36 homes on average for each agent compared with 35 in February and March.

Near-term sales expectations are still in negative territory, but have turned progressively less downcast in each of the last four months, according to the report, moving from a net balance of -52% in December 2022 to stand at -20% in April.

On a 12-month view, expectations are pointing to a largely stable trend in sales activity emerging, registering a net balance reading of +3%.

The average sales time from listing to completion has also continued to lengthen and is now at 20 weeks nationally, respondents claim.

Anecdotal commentary from survey respondents provided insight into recent buying trends with several respondents citing buyers looking for smaller, more affordable homes while people are moving out of older homes to buy more energy efficient new builds, the RICS said.

The latest feedback from the survey in relation to house prices remains in negative territory with a net balance of -39% in April, although this current reading is less negative compared to net balances of -43% and -47% seen in March and February.

Looking ahead to the next twelve-months, the price expectations indicator continues to improve from the lows hit during the end of 2022, returning a net balance of -16% in April compared to the -24% recorded in March.

Simon Rubinsohn, RICS chief economist, said: “Although the newsflow around housing does appear to have steadied over the past month, key indicators from the RICS survey point to a series of challenges in both the sales and lettings space.

“Most notably, buyer demand still appears to be subdued in the face of relatively high borrowing costs, the prospect of at least one more interest rate hike and ongoing affordability challenges.

“Meanwhile, the imbalance between demand and supply in the letting market still remains stark despite the significant increase in rents.

“Critical to addressing both areas of the market is the delivery of more supply. However, indicators of the level of new housing starts in the early part of the year suggests that the picture is if anything continuing to soften as housebuilders activity reflects both macro uncertainty and policy developments.”