House sales at weakest level since first Covid lockdown

The number of house sales being agreed is dropping at the fastest rate since the early stages of the Covid-19 pandemic last month, according to a Royal Institution of Chartered Surveyors (RICS) survey.

Higher mortgage rates are impacting on buying activity with sales and enquiries down in July, according to respondents to RICS’ UK Residential Market Survey. 

Sales agreed registered a balance of -44% last month on the RICS’ index, a further decrease from a score of -36% in June. This is the weakest result since early 2020 when the Covid-19 pandemic hit. The figures balance the proportion of survey respondents reporting an increase compared to a decrease.

The results follow the onset of mortgage rates of above 6% seen in June, following the Bank of England’s decision to raise the Bank’s base rate to 5%. Last week the Bank Rate was put up by a further 0.25% to 5.25%, its 14th consecutive increase, suggesting mortgage rates may be yet to peak.

The RICS survey suggests buyer inquiries are dropping in most areas, with the index scoring -45% in July.

The respondents said that sales volumes are down too, although the -25% recorded is less dramatic than the -31% recorded for the previous month’s survey.

New instructions are also down -13%, a ten percent further decline on the previous month, indicating a deterioration in supply.

The number of market appraisals are down -37%, although inventory levels have remained steady at +38.

In the lettings market, tenant demand was high at +54% in the three months to July, while landlord instructions scored -30%, indicating tightening supply. 

“The recent uptick in mortgage activity looks likely to be reversed over the coming months if the feedback to the latest RICS Residential Survey is anything to go by,” RICS chief economist, Simon Rubinsohn, said.

“The continued weak reading for the new buyer enquiries metric is indicative of the challenges facing prospective purchasers against a backdrop of economic uncertainty, rising interest rates and a tougher credit environment.”

“Just as concerning are the insights being provided around the lettings markets. Demand shows no signs of letting up, supply remains constrained and that means rents are likely to continue rising sharply despite the cost-of-living crisis.”