Confidence drains from UK housing market, RICS says

Expectations for activity in Britain’s housing market have dried up quickly thanks to a worsening economic outlook and rising interest rates, an industry survey showed on Thursday.

The Royal Institution of Chartered Surveyors (RICS) said its gauge of sales expectations for the coming 12 months slid to -36 per cent in July from June’s -21 per cent, the lowest reading since the onset of the COVID-19 pandemic in March 2020.

The survey was conducted before the Bank of England last week announced its biggest rate hike since 1995.

Britain’s housing market, like that in many other rich nations, boomed during the COVID-19 pandemic as people sought more space to work and socialise at home.

However, analysts are looking at how a 40-year high in consumer price inflation and rapidly rising interest rates will cool the market.

RICS’ headline house price balance fell to 63 per cent in July, its lowest since February 2021 but well above the survey’s long-run average 13 per cent. A Reuters poll of economists had pointed to a bigger fall, to 60 per cent.

“It is little surprise that housing market activity is now losing some momentum,” said Tarrant Parsons, RICS senior economist.

“With monetary policy set to be tightened further over the coming months, sales expectations point to a further softening in transaction volumes going forward.”

Parsons said shortage of homes coming to the market would probably offer some support for house prices against the coming slowdown, with the BoE warning last week of a long recession.