The Royal Institution of Chartered Surveyors (RICS), an organization with roots dating back to 1868, has reported a potential upturn in Britain's housing market. This development follows recent policy changes, including an interest rate reduction by the Bank of England, the world's second-oldest central bank, and renewed government attention to the sector.
According to the RICS survey, expectations for property sales in the coming months have reached their highest level since January 2020, just before the onset of the COVID-19 pandemic. This optimistic outlook is attributed to the government's emphasis on boosting housing development and the recent quarter-point base rate reduction.
Simon Rubinsohn, Chief Economist at RICS, commented on the situation:
"The new government's focus on boosting housing development alongside the recent quarter-point base rate cut does appear to have shifted the mood music in the sales market."
Rubinsohn acknowledged the challenges ahead, particularly in implementing planning reforms and the uncertainty surrounding future interest rate decisions. Nevertheless, he noted that the current policy mix is becoming more supportive of the sector.
The survey revealed improvements in several key indicators. New buyer inquiries turned positive for the first time in four months, and agreed sales also showed an uptick. However, the RICS house price measure for July 2024 slightly declined to -19 from June's -17, contrary to economists' expectations of improvement.
It's worth noting that the UK housing market has faced numerous challenges over the years. The government set an ambitious target to build 300,000 new homes per year by the mid-2020s, addressing the ongoing housing crisis that has been a major political issue for decades. The UK's housing stock is among the oldest in Europe, with 38% of homes built before 1946, adding to the complexity of the situation.
While the sales market shows signs of improvement, the rental sector faces significant challenges. The RICS survey indicated increasing demand from tenants coupled with shrinking supply, suggesting potential rental price increases. This situation reflects what Rubinsohn described as "an increasingly hostile environment for investment in the sector."
The rental market's struggles come amid various policy changes, including plans to tighten no-fault eviction rules and modifications to tax and energy efficiency regulations. These factors have contributed to the doubling of the UK's private rented sector since 2002.
As the housing market navigates these changes, it's important to consider the broader context. The UK has one of the highest homeownership rates in Europe at around 65%, and the average house price reached £288,000 in 2023. The government has previously introduced measures like the Help to Buy scheme in 2013 and stamp duty holidays during economic downturns to stimulate the market.
The coming months will be crucial in determining whether the current policy mix can effectively address the challenges facing both the sales and rental sectors of the UK housing market.