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Economic News

Housing market buoyed as hopes grow for rate cut - Rics

By Abigail Townsend

Date: Thursday 08 Feb 2024

LONDON (ShareCast) - (Sharecast News) - The UK housing market continued to stabilise in January, industry research showed on Thursday, as hopes of a cut in interest rates boosted the outlook.
According to the latest UK Residential Market Survey from the Royal Institution of Chartered Surveyors, buyer demand, agreed sales and new instructions all strengthened last month.

New buyer enquiries had a balance of 7, up from -3 in December and the strongest since February 2022. Agreed sales also moved into positive territory, rising to 5 from -5.

Respondents also expected conditions to continue improving. The balance of those anticipating an improvement in sales in the next three months rose to 14, and to 44 for the 12-month outlook.

House prices remained in negative territory, at -18. However, it was a notable improvement on December's -30 and the strongest reading since October 2022.

The Bank of England has increased the cost of borrowing 14 times from December 2021, to a 15-year high of 5.25%.

However, with inflation now well off its recent peak, the BoE has left rates unchanged since August, and most believe the next move will be a cut.

Mortgage rates have also soared, in response to the government's disastrous mini budget in September 2022. But in recent months they too have started to moderate.

Tarrant Parsons, senior economist at Rics, said: "The UK housing market has seen a continued improvement in buyer activity through the early part of the year, supported by the recent easing in mortgage rates.

"Although sales volumes through much of the year ahead are likely to remain relatively subdued compared to the longer-term average, the outlook has now turned modestly brighter on a consistent basis over the past few survey reports.

"However, this is not to say that mortgage affordability isn't still a significant challenge, and any further unwelcome surprises with regards to inflation may still cause interest rates expectations to be revised."

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said January's survey was "consistent with our view that house prices will recover materially this year.

"Supply is continuing to accumulate, with the new instructions balance - which rose to 11 from 2 - outpacing the new buyer enquiries balance for the twentieth month now. Note the average number of properties on an estate agent's book increased to 40.6, its largest amount since March 2021."

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