UK house sales decline as soaring inflation cuts into demand

THE UK housing market came under further pressure from the cost-of-living crisis in July as sales and buyer demand fell, and agents turned increasingly gloomy on the outlook, the Royal Institution of Chartered Surveyors (RICS) said.

The closely-watched survey showed sales expectations for the next 12 months are at the lowest level since March 2020, and new buyer inquiries fell for a third month - the longest run since the early days of the pandemic. Measures of current sales also fell.

The report is the latest to suggest that higher interest rates and soaring inflation are taking a toll on the property market, which has boomed all the way through pandemic lockdowns and the recession. The survey was mainly carried out before the Bank of England (BOE) hiked interested rates by 50 basis points last week, taking the key rate to 1.75 per cent.

Still, while there's evidence of weaker demand, that's yet to translate into falling prices, according to RICS. A "severe" lack of stock meant buyers bid up house prices again. Estate agents predict further gains over the next year, even though expectations for growth have eased since the start of 2022.

That finding contrasts to a report from the mortgage lender Halifax, which last week suggested prices declined for the first time in a year in July.

"Amid a backdrop of sharply rising living costs, slowing economic growth and higher interest rates, it is little surprise that housing market activity is now losing some momentum," said Tarrant Parsons, Senior Economist at RICS. "Nevertheless, with respect to house prices, limited supply available is still seen as a crucial factor underpinning the market."

Here's a roundup of comments made by agents in the RICS survey:

Martin Allen from Elgars in Canterbury, Elgars

"Buyers offering over guide are beginning to try and chip back the price partly due to concerns about the market long term and the increasing cost/shortage of labour and materials for improvements needed."

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Colin Pryke, a Chartered Surveyor & Registered Valuer from London

"Interest rate increase by BOE by 0.5 to 1.75 per cent will take time to filter through to have any effect on property prices. But economic indicators are pessimistic and it is possible that there will be an adverse effect on market confidence."

Douglas Crichton from Grosvenor in London

"Cost of living and interest rates rises will cool the market."

Christopher Clark from Ely Langley Greig in Eastleigh

"Demand still outstrips the limited supply coming to the market, but the future is looking difficult as lenders become more wary and buyers are squeezed financially." BLOOMBERG