Market Analysis

Election and rate cut signals a rebound in UK property sales, according to RICS

Amos Simanungkalit · 08 Aug 20249.5K Views

Britain's housing market is poised for a sales surge in the coming months following the Bank of England's interest rate cut and the new government's focus on the sector, according to a survey released on Thursday.

The Royal Institution of Chartered Surveyors (RICS) reported that its metric for expected sales over the next three months reached its highest level since January 2020, just before the coronavirus pandemic hit Britain.

"The new government's emphasis on increasing housing development, combined with the recent quarter-point reduction in the base rate, seems to have positively impacted the sales market," said Simon Rubinsohn, RICS Chief Economist.

"While significant challenges remain in achieving the goals related to planning reform, and it's uncertain whether the Bank of England will continue to ease policy following the August cut, the current policy environment is becoming more favorable for the sector," he added.

The housing market's outlook slightly improved last month as mortgage rates decreased ahead of the BoE's August 1st cut, which lowered borrowing costs from their 16-year high.

A measure of new buyer inquiries turned positive for the first time in four months, and agreed sales also saw improvement.

However, RICS' house price index for July fell to -19 from June's -17, contrary to economists' expectations of an improvement to -10, as polled by Reuters.

Previous house price data from mortgage lenders Nationwide and Halifax indicated an uptick in price growth last month.

The rental sector presented a grimmer picture, with rising tenant demand and decreasing supply, pointing to potential future rental price hikes.

Rubinsohn noted that these findings reflect "an increasingly challenging environment for investment in the sector."

The new administration has adopted the previous government's delayed plans to tighten no-fault eviction rules, causing concern among landlords. Additionally, changes to tax and energy efficiency regulations have increased their costs in recent years.