RICS confirms fastest drop in house prices for decades

RICS Residential Market Survey, January 2023 

Evidence that the property market is not only falling, but the fall is very steep.

• Buyer demand still falling, resulting in fewer sales being agreed
• House prices continue to decline
• Interesting new data suggests buyers adding premiums to highly energy efficient homes

The December 2022 RICS UK Residential Survey results show a further weakening in the sales market to end the year, with metrics tracking property sales, instructions sell, as well as price trends, demonstrating   further declines over the month.

Additionally, the survey results suggest that the housing market will remain on this downward trend over the coming months.

At a national level, the net balance reading for new buyer enquiries came in at -39% (down marginally on a figure of -38% beforehand), signalling an ongoing weakness in new buyer demand across the UK.

Alongside this, the number of fresh property listings coming onto the sales market also fell, with the latest net balance of -23% representing the weakest return for this indicator since September 2021.

Agreed sales across the country reported a net balance of -41% among survey participants, indicating a further decline during December. This reading is down from -36% reported in November. This downward sales trend became clearer across virtually all parts of the UK over the month, with respondents in the North West of England, Scotland, Wales and London all citing a particularly quiet month for activity in our latest results.

Turning to house prices, a national net balance of -42% of respondents reported a decline in prices over the latest survey period. This represents a further weakening relative to the figure of -26% posted in the November survey and indicates the downward price trend gaining further traction.

When separated, all regions across England are now seeing prices soften to some degree, with feedback pointing to East Anglia and the South East seeing the sharpest rate of decline in net balance terms.

Respondents across the UK envisage some pull-back in prices in the three-months ahead.

Our December survey included a set of additional questions looking at the impact of energy efficiency ratings on buyer behaviour.

When asked if respondents are seeing greater interest from buyers in homes that are more energy efficient, around 40% of the survey sample answered yes, although this was outweighed by 60% who said they do not see this trend.

Meanwhile, 41% of respondents noted that sellers were attempting to attach a price premium on homes with a high energy efficiency rating.

By the same token, 61% of contributors stated that highly energy efficient homes were holding their value in the current market.

Looking at the lettings market, tenant demand increased over December according to a net balance of +28% of contributors. However, this is the lowest reading since February 2021 and suggests that the pace of demand growth is slowing across the rental market.

On the supply side, new landlord instructions remain on a downward trend, evidenced by a net balance of -24% of respondents seeing a decline in December.

On the back of this, near-term expectations continue to point to rents being squeezed higher, with the net balance of respondents anticipating an increase in rent remaining unchanged from last month at +42%.