House prices however expected to rise in the short term due to lack of supply
Surveyors have reported a drop in new buyer inquiries in May.
According to RICS monthly UK Residential Market Survey, more surveyors reported a fall in new buyer enquiries in May than reported rises, with a ‘net balance’ of -7% (see box for an explanation of RICS’ methodology). This was down from April, which saw a positive net balance of 8%.
A RICS spokesperson said the drop was “a potential side effect of the rising cost of living and higher interest rates.”
Despite the reported fall in enquiries, most RICS members surveyed reported an increase in house prices in May, with a net balance of 73% reporting rises. A net balance of 42% of surveyors also expect prices to be “higher” in a year’s time.
Simon Rubinsohn, chief economist at RICS, said: “The increase in the cost of mortgage finance alongside growing concerns about the economic outlook is unsurprisingly having an impact, albeit a relatively modest one at this point, on buyer activity in the sales market.
“Despite this, prices are viewed as likely to remain resilient into 2023. But as is often the case in these circumstances, the pressure is likely to felt more visibly in transaction levels which are seen as likely to slow as the year wears on.”
The RICS findings follow Bank of England data last week which suggested that the bank’s decision to raise interest rates may be having an impact on mortgage lending.
The data shows monthly net mortgage debt fell by a third in April to £4.1bn following increases to the base rate of interest.
Mortgage approvals also fell from 69,500 in April to 66,000 in March, with both approvals and mortgage debt slightly below their 12-month pre-pandemic average for the year to February 2020. The Bank of England
RICS UK Residential Market Survey explained
The RICS UK Residential Market Survey is a monthly sentiment survey of chartered surveyors who operate in the residential sales and lettings markets. Surveyors are asked 18 questions on a range of metrics such as sales, enquiries, listings and house prices and are simply asked whether these have increased, stayed the same or decreased.
The ‘net balance’ refers to the proportion of respondents reporting a rise in a metric minus those reporting a fall.
For example, if 30% reported an increase in buyer enquiries and 5% reported a fall, the net balance would be +25%.