Stock of homes for sale picking up but ‘storm clouds are gathered’

The flow of fresh homes coming on the market reached its strongest level in nearly two years in May, figures from surveyors indicate.

The Royal Institution of Chartered Surveyors (Rics) said a net balance of 14% of property professionals reported seeing new instructions to sell rising rather than falling in May, marking the best reading for new property listings since March 2021.

The latest survey result also broke 13 months in a row of new instructions falling rather than rising.

The report said: “Alongside this, average stock levels on estate agents’ books have picked up slightly in recent months to stand at 38 properties, albeit inventories remain low on a historical comparison (and still comfortably below the near 40 average seen over the past five years).”

Housing market demand was also at its least negative level in a year in May.

A net balance of 18% of property professionals reported seeing falls in new buyer inquiries rather than rises.

Although this was still a negative reading, it represented an improvement compared with a net balance of 34% of professionals reporting falls in April, as well as being the least negative figure for the past 12 months, the report said.

A net balance of 7% of surveyors reported a drop-off in sales rather than a rise in May, which was also less downbeat than March and April, Rics said.

A balance of 30% of surveyors reported a fall in house prices rather than a rise in May, which was less negative than 46% in February.

Rics said there were some variations in house prices across the UK. In London a balance of 3% of surveyors reported prices falling rather than rising, and in Scotland and Northern Ireland the survey indicated prices were heading upwards.

By contrast, in the the East Midlands and the South East, property professionals were particularly likely to report prices heading downwards.

Meanwhile, in the lettings sector, demand continued to outstrip supply, the report added.

Rics senior economist, Tarrant Parsons, said: “The latest Rics UK residential survey feedback indicates a modest recovery in the sales market activity during May, with generally less negativity compared to the end of 2022.

“However, it seems storm clouds are gathered, with the UK’s stubbornly high inflation likely undermining the recent improvement in activity by prompting the Bank of England to take further action through interest rate rises, leading to higher mortgage rates and ultimately reducing affordability and buyer demand.

“The banking sector appears to expect this, with many banks and building societies already introducing products with higher interest rates.”

A Cheshire-based professional said: “House prices seem to be holding up despite a challenging economic climate.

“Demand is still outstripping supply so houses are still generally selling quickly after coming on the market. However, purchasers are more cautious on price.”

Another professional based in Birmingham said: “After a somewhat subdued April and early May the property market has burst into life with increased viewings, sales and new instructions.”

A Glasgow-based surveyor said: “Against the continuing low levels of stock, the rise in interest rates has not unduly affected the level of values being achieved… The other factor now being seen is a rise in the value of ex-rental stock being sold.”