UK estate agents see inflation calming housing market frenzy
UK ESTATE agents are preparing for the cost of living crisis and Bank of England rate increases to take some of the heat out of the housing market, according to the Royal Institution of Chartered Surveyor (RICS).
The warning came in a survey that found activity remained buoyant in April, with house prices continuing to rise across the country amid a shortage of homes for sale that shows no signs of abating.
Forward-looking indicators softened, however, RICS said. On balance, agents expect sales to fall over the coming year and predict prices will rise less strongly than anticipated in February.
Mortgage lenders are following the Bank of England by raising interest rates from historic lows, adding to the pressure on household budgets inflicted by the worst bout of inflation since the 1980s.
The risks to the outlook were underlined by a gloomy report this week from the National Institute of Economic and Social Research, which forecast the economy sliding into recession and unemployment rising. The BOE expects inflation to exceed 10 per cent in October.
With housing stock levels so low, RICS said the loss of momentum in the housing market is likely to be modest.
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“For the time being at least, even though there is a lot of caution about the future economic landscape, it seems that limited supply available on the market, coupled with steady demand growth, are still the overriding drivers of house prices,” said RICS Economist Tarrant Parsons.
In a bad sign for future supply, RICS said that the number of appraisals being undertaken by prospective sellers is little changed compared with 12 months ago.
Tom Bill, head of residential research at estate agent Knight Frank, said buyer demand is now “robust rather than fierce” but that would-be sellers are staying put because they are unable to find somewhere to buy.
“We expect to see single digit rather than double digit annual [price] growth by the end of the year as both stock levels and mortgage rates increase,” he said. “While the cost-of-living squeeze will also intensify, we are not factoring in a recession.” BLOOMBERG
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