Homebuyer inquiries fell in August at the steepest rate since the early stages of the coronavirus pandemic as the cost-of-living crisis and wider economic challenges affected market conditions, according to surveyors.
The Royal Institution of Chartered Surveyors (Rics) said a net balance of 39% of property professionals reported a fall rather than a rise in new buyer inquiries in August, marking the sharpest downturn since April 2020.
New buyer inquiries have now been falling for four months in a row.
House sales were also down in August, falling for five months in a row, with the latest feedback implying this downward trend is becoming further entrenched, Rics said.
Looking to the 12 months ahead, sales expectations are the most downbeat they have been since Rics started collecting the data in 2012, with a balance of 45% of property professionals expecting falls.
However, with average stock levels on estate agents’ books at a record low of 34 homes per branch, according to Rics’ data, the pressure on house prices is still moving upwards.
The report said: “Looking ahead, contributors continue to note that the current level of market appraisals being undertaken is similar to that seen 12 months ago, suggesting the tight supply backdrop is unlikely to change dramatically in the near future.”
A net balance of 53% of property professionals reported an increase in house prices during August, down from 62% in July, but comfortably above the long-run average of 13%.
Looking to the year ahead however, expectations for house price growth have eased back, with a balance of 3% of professionals predicting prices will be higher in 12 months’ time, down from a net balance reading of 78% back in February.
In the lettings market, tenant demand continues to rise, with a net balance of 50% of contributors seeing an increase in tenant demand over the month.
Alongside this, the latest net balance for landlord instructions came in at minus 13%, indicating falling supply across the rental market.
Given this excess of demand over supply, rents are expected to rise in the near-term. When viewed over the next 12 months, rents are anticipated to rise by close to 4% across the UK, Rics said.
Tarrant Parsons, a senior economist at Rics, said: “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.
“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.”