UK property surveyors said the housing market settled further into hibernation in January as buyer inquiries, agreed sales and new instructions to sell all fell again.
The lackluster activity, driven by higher interest rates and the tightest cost-of-living squeeze in generations, translated into a further drop in prices at the start of the year, the Royal Institution of Chartered Surveyors said Thursday.
The findings, which are among the most forward-looking metrics for the property market, suggests that any sign of a pick-up last month may be short-lived. It adds to evidence that prices may be headed into the longest slump since the global financial crisis in 2008.
“The overall tone of the feedback remains subdued, which is not altogether surprising given the jump in mortgage rates since the autumn,” said Simon Rubinsohn, chief economist at RICS.
The findings contrast with a report last month from the property-search website Rightmove, which said sellers had been able to bump up their asking prices for the first time in three months. But RICS said it’s seeing “a muted market,” with all regions in England seeing a retreat in prices.
“Prices are now beginning to reflect the shift in balance between demand and supply,” Rubinsohn said. Looking at the next 12 months, price expectations were negative everywhere except Northern Ireland.
House prices have rocketed since the pandemic, which prompted a surge in sales as buyers took advantage of rock-bottom interest rates to find places with more space outside city centers anticipating they can work from home.
Policy makers at the Bank of
England are watching the housing market for signs that it will spark inflation in the broader economy. Chief Economist Huw Pill said on Friday that higher property prices are not necessarily “good for the economy.”
There were signs that the outlook for the property market had improved since December. Before Christmas, a net balance of minus 42% of estate agents said the sales outlook would be downcast for the next 12 months. That figure eased to minus 20% in the latest report.
Rubinsohn said it was “questionable” how much further prices would fall “given that recent macro forecasts from the Bank of England and others are now envisaging a less harsh economic environment this year.”
The cost of renting a home is surging as supply falls further short of tenant demand.
RICS recorded a further increase in people searching for places to rent, while landlord instructions to let properties fell for the 10th straight quarter.
“The rental market continues to show strong interest from tenants and limited stock available, which is keeping a firm momentum to rental growth,” Rubinsohn said.