Number Of House Sales Predicted To Fall Over Next 12 Months

Number Of House Sales Predicted To Fall Over Next 12 Months
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According to research by the Royal Institution of Chartered Surveyors (RICS), the number of house sales will decline in the next 12 months, amid fears of a looming recession and rising interest rates.

The RICS has said it is expecting residential property sales to drop sharply over the next 12 months. The industry body named fears of a recession and the rising interest rates as reasons for their predictions.

Its members have also reported a sharp drop in enquiries from new buyers, the sharpest since April 2020. This seems to indicate that demand is slowing down.

Concerns over the economic backdrop and rising interest rates continue to take their toll on market momentum, with strong activity early in the year now giving way to a more subdued picture.

Tarrant Parsons, Economist at RICS

Housing Market Not Anticipated To Crash

Despite fears of a recession looming, industry insiders do not think that the housing market will collapse.

The RICS reported that their survey of its members has shown that more are expecting the number of house sales to fall in the next 12 months, signalling a potential cooling of the market.

Despite this, house prices are expected to continue to rise, albeit at a much lower rate. The RICS house price balance for the next 12 months has dropped to +3, which means only a slight rise is expected.

But because supply is still much lower than demand, a crash of the market is unlikely. As this imbalance is underpinning the market and keeps upwards pressure on house prices.

With more properties coming on the market and buyer demand waning, sellers are becoming more realistic when it comes to pricing their home. There seems to be an understanding amongst sellers that increased interest rates and the cost-of-living crisis have an impact on how much buyers can afford.

Looming interest rate hikes, the cost-of-living crisis and media reports of an impending crash is bringing more stock to the market and making sellers more realistic about pricing.

James Hyman, Head of Residential for London Agent at Cluttons

And while the recently announced Energy Bill Support Scheme will support households with their energy costs, it is unlikely that this will stop the cooling down of the property market.

Interest Rates Set To Rise Further

Especially, because it is expected that the Bank of England (BoE) will raise interest further this month.

After the death of Queen Elizabeth II on 8 September 2022, the BoE has announced that their monetary policy committee meeting – at which the fiscal body decides on possible interest rate rises – will be postponed by a week.

Out of respect for the deceased monarch and the national period of mourning observed in the UK, the BoE will now announce the committee’s decision on 22 September.

At the last committee meeting in August, the BoE decided to raise the base rate to 1.75% in an effort to bring inflation under control. Analysts expect that interest rates will rise further this month.

It is anticipated that the Bank will raise the base rate to 2.25%, which would be the highest level since December 2008.

Indications Signal A Rebalancing Of Market

In the recent weeks and months, several signs have emerged that indicate that the property market is balancing itself out.

Data from TwentyCi has shown that the number of sales agreed in August has only slightly risen. Righmove has also reported a drop in buyer demand by 4% in August, compared to the same month in 2021.

At the same time, the number of new instructions has risen, according to TwentyCi. Which is also supported by Righmove reporting a 12% increase in listing compared to last year.

All these signs support the prediction by the RICS that the number of house sales will fall in the next 12 months.

However, for now this slowdown is disguised by the continued rise of house prices, which is driven by the lack of supply.

But experts expect the housing stock to build up over autumn. At the same time, demand will be controlled by the rising interest rates as well as the cost-of-living crisis.

The recently announced financial support for energy bills will help households in the short-term, but it is not expected to have an impact on the housing market.

As more and more houses come on the market and demand slows down, the market will normalise.


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