UK housing market sees demand soften - RICS

House prices fell less sharply last month, an industry survey showed on Thursday, although higher borrowing costs and an uncertain economic outlook continued to hamper demand.

According to the latest residential market survey from the Royal Institution of Chartered Surveyors, house prices remained in negative territory in April, with the net balance of surveyors reporting an increase in house prices over the last three months at -39.

However, that was an improvement on March’s balance of -43 as well as being slightly ahead of consensus expectations of -40. It was also the highest figure for five months.

Agreed sales also improved, with a balance of -19, up from March’s -30 and the least negative reading since July 2022.

But the new buyer balance fell to -37 from -30 in March, as high borrowing costs and an uncertain economic outlook weighed on consumer confidence. Supply also remained constrained by historic standards, although the number of properties on the average estate agents books climbed to an 11-month high 36.4.

Simon Rubinsohn, chief economist at RICS, said: "Although the news flow around housing does appear to have steadied over the past month, key indicators from the RICS survey point to a series of challenges.

"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."

Samuel Rees, senior public affairs officer at RICS, said: "Supply is one of the biggest challenges to housing in the UK, with prices and affordability driven in part by the availability of stock.

"The removal of the annual 300,000 new homes ambition by the government, along with wider planning, material and labour concerns, are adding to the challenges of house building."

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: "The latest RICS residential market survey suggests the downturn in the housing market has further to run.

"With mortgage payments likely to remain unaffordable or undesirable for many potential buyers, we expect the stock of unsold properties to continue to accumulate, until sellers reduce their prices further.

"All told, we remain comfortable with our forecast for a peak-to-trough fall of around 8%, which implies that the official measure still has 6% further to drop from February’s level."