RICS: House prices continue to rise as demand falls
The Scottish housing market continues to weaken, with last month bringing another decrease in buyer demand and agreed sales, according to the October 2022 RICS Residential Market Survey. Prices though were still increasing according to respondents.
Demand for residential property fell for the sixth consecutive month in Scotland, with a net balance of -45% of respondents reporting a fall in new buyer enquiries. A net balance of -48% of surveyors reported that newly agreed sales fell in the month of October.
Looking at supply levels, these also seemed to have eased in the last month with a net balance of -43% of respondents stating new instructions to sell had fallen, indicating that there is less stock available to new buyers.
Whilst demand is easing, prices are reported to be still rising. A net balance of +36% of respondents reported that residential property prices rose over the past three months.
The easing in both demand and supply may be weighing on surveyor’s outlook, with a net balance of -12% of respondents expecting sales to fall over the next quarter, and a net balance of -38% expect that prices will also fall over the next three months.
In the lettings market, tenant demand in Scotland continues to rise at a relatively solid pace, with a net balance of +24% of survey participants noting an increase in October (part of the seasonally adjusted quarterly lettings dataset). At the same time, landlord instructions fell. Given this mismatch, rents are expected to be driven higher over the near-term, returning a net balance reading of +19%. Though this has eased from +58% last time.
Alan Kennedy MRICS, Shepherd Chartered Surveyors in Fraserburgh, said: “Certain sectors of the market are still performing well, particularly well-presented properties in good condition. Demand will, however, be impacted by increasing mortgage rates. Unpredictable times ahead.”
Thomas Baird MRICS of Select Surveyors in Glasgow added: “The property market is clearly facing a period of instability and the upcoming six months are expected to be slow with potential for 12 months of stifled conditions, withdrawn mortgage products and high interest rates.”
Simon Rubinsohn, RICS chief economist, commented: “The latest feedback to the RICS survey provides further evidence of buyer caution in the face of the sharp rise in mortgage costs. As a result, the volume of activity is likely to slip back over the coming months and realistic pricing is now much more important to complete a sale. The settling down in financial markets could provide some relief although it may be premature to assume this will be reflected in a reduction in lending rates anytime soon. However, the employment picture remains critical to the medium-term outlook and for the time being, that remains solid.
“As far as the lettings market is concerned, the imbalance between demand and supply still appears unusually extended leading to rent expectations in the survey remaining at elevated levels and it is difficult to see this changing anytime soon in the current environment.”