House Sales Set to Rise Amid Mortgage Rate Optimism

UK house sales are expected to increase over the next three months, with optimism that mortgage rates will soon decline, according to a survey by the Royal Institution of Chartered Surveyors (RICS).

A net balance of 20% of professionals anticipate a recovery in home sales over the next three months, marking the highest level of sales expectations since January 2022, RICS reported.

Economists predict that the base rate could be reduced from its 16-year high of 5.25% to 5% at the next vote on August 1. In response, the UK's largest banks have recently cut mortgage rates, offering some relief to homeowners and potential buyers.

The newly elected Labour government has committed to invigorating the housing market, aiming to deliver 1.5 million homes over the next five years, a goal not achieved since the 1960s.

A balance of 54% of professionals surveyed expect house prices to be higher in a year, highlighting a significant challenge for the new government. Increasing the housing supply "will not be an easy task," RICS noted.

Tarrant Parsons, senior economist at RICS, stated: “Although activity across the housing market remained subdued last month, forward-looking aspects did improve slightly. There are some factors emerging now that could support a recovery in the months ahead. If the Bank of England decides that the current inflation backdrop is benign enough to start loosening monetary policy next month, this may prompt a further softening in lending rates. In addition, the recent election delivered a clear outcome, with housing pushed up the political agenda.”

Survey indicates boost in UK Home sales and prices with potential mortgage rate cuts.

In the rental market, demand continues to outpace supply despite sharp rent increases in many parts of the country. A net balance of 28% of professionals observed an increase in tenant demand in June, while a net balance of 11% saw a decline in new landlord instructions, indicating a renewed drop in new rental listings. Looking ahead, a net balance of 38% of professionals expect rental prices to rise over the next three months.

Before the election, June saw falling sales and prices, and dwindling buyer numbers, compounded by high mortgage rates. July may bring more hope, driven by the election result and the arrival of a new government. In the meantime, agents are optimistic for an upswing in consumer sentiment, encouraged by the potential for positive changes under the new administration.

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