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UK Property Surveyors Expect Rise in Home Sales After Election

An estate agents 'For Sale' sign outside a residential property in London. Photographer: Hollie Adams/Bloomberg (Hollie Adams/Bloomberg)

(Bloomberg) -- UK home sales are likely to rebound as buyers draw more confidence that interest rates will fall and the uncertainties of last week’s general election pass, the Royal Institution of Chartered Surveyors said.

RICS said its measure of residential sales expectations over the next three months accelerated to the highest level since the start of 2022. That led respondents to anticipate prices will pick up in the near-term for the first time in two years.

Elevated mortgage costs, the election and the lingering effects of the cost-of-living crisis have weighed on confidence in the market even though home prices defied expectations for a sharp drop last year. The RICS figures suggest the market is about to turn a corner as the economy improves.

“Although activity across the housing market remained subdued last month, forward looking aspects did improve slightly,” Tarrant Parsons, senior economist at RICS, said in a report Thursday. “If the Bank of England does decide 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.”

Labour, which saw a landslide win at the election on July 4, promised to build 1.5 million homes over the next five years, a target not met since the 1960s. It’s also planning mortgage guarantees for first-time buyers. Expectations that house prices will increase over the next 12 months highlight the challenges ahead for increasing supply to meet the projected boost in buyers, according to RICS.

New buyer inquiries slowed for a third consecutive month in June, while home sales and prices also remained in slightly negative territory, according to the RICS report. Separate reports from mortgage lenders also showed house prices little changed or posting mild declines in June.

Buyers are hoping the central bank could start cutting interest rates from a 16-year high when policymakers meet in August as inflation returned to the 2% target. Mortgage affordability remains stretched, with the number of mortgage approvals slipping to a four-month low in May, according to BOE data.

That’s exacerbating supply shortages in the rental market as prospective buyers waiting for lower interest rates inflate demand. RICS figures showed new rental listings slipping further in June, while expectations that rental prices will increase over the next three months continued to go up.

©2024 Bloomberg L.P.

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