House prices are contining to rise and are still expected to be higher in 12 months, despite the the longest stretch of decreasing buyer demand since the start of the Covid-19 pandemic, the Royal Institution of Chartered Surveyors says.
A quarter of property professionals reported new buyer inquiries fell in July, marking the third month in a row of an overall decline.
“As such, this marks the third successive report in which this indicator has been in negative territory, thereby representing the longest stretch of falling demand seen since the early stages of the pandemic,” said the institute's report.
The previous stretch of falling demand took place in March, April and May 2020.
A dip in new buyer inquiries was seen across the UK generally over the latest survey period.
Expectations among property professionals for sales in the next 12 months were the most downbeat since March 2020 – the month that the UK coronavirus lockdowns started.
Higher interest rates and the crisis in the cost of living were given by contributors as causes for the drop in market activity.
The latest survey was carried out before the Bank of England announced a rate rise last week that was the biggest single rate jump since 1995, which according to calculations by UK Finance adds about £50 ($61) a month to the cost of the average mortgage.
But a lack of stock is continuing to put an upwards pressure on house prices.
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A net balance of 63 per cent of surveyors reported an increase in house prices during July rather than a decline.
And while this is more moderate than a recent high of 78 per cent in April, it is comfortably above the long-term average and indicates a firmly upwards trend, the institute said.
Looking further ahead, while price expectations for the 12 months ahead have eased, the latest survey findings still indicate that house prices will be higher in a year’s time than they are now,
In the rental market, meanwhile, tenant demand continues to rise, with a net balance of 36 per cent of property professionals reporting an increase.
With new landlord instructions declining, rents are expected to rise sharply over the near term, with all parts of the UK anticipated to see a further pick-up, the institute said.
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“Amid a backdrop of sharply rising living costs, slowing economic growth and higher interest rates, it is little surprise that housing market activity is now losing some momentum," said Tarrant Parsons, senior economist at the institute.
“With monetary policy set to be tightened further over the coming months, sales expectations point to a further softening in transaction volumes going forward.
“Nevertheless, with respect to house prices, limited supply available is still seen as a crucial factor underpinning the market.
"Although house price growth is likely to continue to ease, respondents still anticipate prices will be modestly higher than current levels in a year’s time.”
Tom Bill, head of UK residential research at estate agent Knight Frank, said: “Supply is so low because many people have taken a summer holiday for the first time in two years.
“Autumn will provide the acid test for the property market and we expect annual price growth to slow to single digits as supply picks up and demand cools.”