The housing market ended 2024 in a “reasonably solid” position, but changing macroeconomic conditions could be a “significant headwind” looking ahead.
According to the Royal Institution of Chartered Surveyors (RICS) Residential Market Survey for 2024, most of the metrics used to measure housing market activity ended the year in “modestly positive territory”, but the macroeconomic environment was now “more challenging”.
It explained: “The recent rise in bond yields, along with other lending rates, if sustained, may prove to be a significant headwind moving forward.”
A headline net balance of 5% meant there had been an increase in new buyer enquiries. This is down from a net balance of 11% recorded in the prior two months.
It is also the lowest positive return since July, which RICS said pointed to a “flatter trend” in terms of buyer demand.
Agreed sales improved with a net balance of 7%, which is an increase from 1% in November.
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Near-term sales expectations for the housing market are “mildly positive” at 16%, down from 19% and 29% in the two months prior.
Around 37% of contributors thought that sales activity would grow in the next 12 months, which is in line with results from the past three months.
New instructions in the housing market are also positive at 14%, which is the sixth consecutive month of positive activity.
The report stated that compared to the equivalent period last year, the number of market appraisals was in neutral territory at negative 3%, the lowest reading since December 2023.
RICS said this may “translate into a more subdued flow of new listings coming through in due course”.
Looking at house prices, the report stated that house prices were rising in every region, with Northern Ireland and Scotland reporting the strongest house price growth.
Participants said that national house prices are expected to rise further at the three-month and 12-month marks. A net balance of 53% expect house prices to climb higher over the year.
On the letting side, tenant demand stayed relatively flat with a net balance of minus 3% and landlord instructions reported a net balance of minus 27%, a decrease from minus 13%.
A net balance of 37% expected further rent rises, a rise from 29%.
Simon Rubinsohn, RICS’ chief economist, said: “The latest results from the RICS Residential Market Survey points to a further improvement in sentiment in the housing market, despite concerns about the potential impact of rising bond yields on borrowing costs. Buyer enquiries rose once again, albeit at a slower pace than in November, and the headline price indicator also moved higher.
“More significantly, the signals from the survey around expectations over the next twelve months also remain solidly positive for now. However, the resilience of the uplift in market mood could be tested if the mortgage rates do begin to climb in a material way over the coming months. That, critically, would also be a concern for developers, who will want to see a solid market as a backdrop for ramping up housebuilding to help meet the government’s ambitious 1.5 million homes target for this Parliament.”
