The June 2022 RICS UK Residential Survey results again point to a softening in demand at the headline level. Nevertheless, with new instructions remaining generally flat over recent months, tight supply conditions are still underpinning house prices. Indeed, for the time being at least, respondents continue to cite an increase in house prices across all parts of the UK, even if the pace of growth looks to be easing to a certain degree.

At the national level, the latest net balance for new buyer enquiries slipped to -27%, down from a reading of -9% previously. As such, this marks the second consecutive month in which the survey’s headline measure of demand has been in negative territory. Interestingly, the feedback on buyer enquiries is a little more resilient in London compared most other parts of the UK, with the capital exhibiting a net balance of +7% in June.

Meanwhile, the volume of sales agreed over the month dipped slightly at the UK-wide level, evidenced by a net balance of -13% being returned in June (a little softer than a figure of -5% posted in the previous iteration of the survey). Looking ahead, near-term sales expectations are now marginally negative, with a net balance of -9% of respondents anticipating a fall in transactions over the coming three months. Further out, twelve-month sales expectations are also negative, delivering a net balance of -21% (albeit this is broadly in-line with last month’s reading of -24%).

Looking at the feedback around new instructions, the latest net balance of -1% remains consistent with a more or less flat trend across the UK in aggregate. Moreover, survey participants are also reporting market appraisals to be broadly unchanged relative to the picture twelve months ago, suggesting the tight supply backdrop is unlikely to shift drastically in the immediate future.

With available stock on the market still limited, house prices continue to drift higher despite the recent cooling in demand. In aggregate, a net balance of +65% of respondents noted an increase in house prices over the latest survey period. Although this is down slightly on a recent high of +79% back in April, the latest reading is still indicative of a solid pace of house price inflation and comfortably above the long-run average of +13%. Disaggregating the data shows that Northern Ireland, Yorkshire & the Humber and the South East all continue to see particularly strong house price growth.

In another sign of the still resilient picture for national house prices, 50% of contributors report that average sales prices are coming in above asking prices for properties listed at up to £500k. Alongside this, 39% of respondents cite sales prices are coming in above asking prices for properties marketed at between £500k and £1m. The picture is a little different for properties listed at £1m or above however, with respondents (on balance) reporting sales prices to be slightly below asking prices at this point in time.

In terms of the outlook, twelve-month price expectations moderated for a fourth month in succession. A net balance of +37% of respondents foresee prices continuing to climb higher over the year ahead, a noticeable easing compared to a reading of +78% returned back in February. Nevertheless, even though price expectations have been trimmed in most cases relative to earlier in the year, they remain in positive territory (in net balance terms) across all parts of the UK.

In the lettings market, a net balance of +36% of contributors reported an increase in tenant demand over the month (part of the non-seasonally adjusted monthly lettings market dataset). Alongside this, landlord instructions fell for a third month in a row, with the latest net balance coming in at -11%. On the back of this ongoing mismatch between rising demand and restricted supply, rents are seen rising further over the near-term by a net balance of +52% of respondents.

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