Demand properties falls for tenth month in a row

February saw another dip in numbers of house hunters, reports Vicky Shaw

House sales are more likely to be being agreed at a discount typically when homes are priced above £500,000 than below this level, research by surveyors suggests.

Stretched mortgage affordability is weighing on housing market activity, the Royal Institution of Chartered Surveyors (Rics) said.

It looked at the difference between asking and selling prices in its February survey of property professionals, asking how average sales prices had compared with initial asking prices over the past three months.

In the mainstream housing market covering prices up to £500,000, 60.3% of professionals indicated that prices were being agreed at below the asking price.

For properties priced between £500,000 and £1 million, the share of professionals observing prices being agreed at below the asking price jumped to 71.5% – and the proportion of contributors taking this view on properties priced at over £1 million was broadly similar (at 68.3%), Rics said.

The report added: “It is worth noting that the majority of the feedback points to sales being agreed within 5% of the ask price rather than anything significantly greater.”

There were some signs of the housing market becoming less downbeat.

The proportion of professionals seeing new buyer inquiries in February improved compared with January, but overall, the proportion seeing inquiries fall still outweighed those seeing increases.

While it marked the tenth negative monthly reading for new buyer inquiries, it was the least negative result since July 2022.

The number of new sales being agreed was also less negative in February than in January, but the average time taken to complete sales continues to rise and is now approaching 19 weeks, Rics said.

By contrast, in the rental market, demand from tenants continues to increase, while landlord instructions to let properties continue to decline, putting an upward pressure on rental prices.

The report said :“As far as the lettings market is concerned, it is clear that respondents don’t envisage a material change in the demand supply imbalance in the foreseeable future, with rents seen as likely to rise by more than 25% at the five-year time horizon.”

Tarrant Parsons, senior economist at Rics said: “The housing market continues to adjust to the tighter lending climate, with stretched mortgage affordability still weighing heavily on activity.

“Given the ongoing weakness in demand, house prices remain on a downward trajectory, and are expected to see further falls through the first half of the year at least.

“Going forward, near-term expectations suggest market activity will remain generally subdued over the coming months, although the latest survey feedback shows tentative signs that the ongoing decline in buyer inquiries is now moderating.”

Sam Rees, senior public affairs officer at Rics said: “Ahead of the UK Budget on March 15, Rics is emphasising the critical role housing has to the UK economy, and the need to boost supply through new builds and commercial property conversions where appropriate whilst conforming to the strictest standards.”

The research is a monthly sentiment survey by Rics of chartered surveyors who operate in the UK’s residential sales and lettings markets.