Demand from prospective home buyers fell in May, in what could be a side-effect of the rising cost of living and higher interest rates, according to surveyors.
The Royal Institution of Chartered Surveyors (Rics) said property professionals reported that new buyer inquiries fell in May, with a net balance of 7% reporting falls rather than rises.
This was a turnaround from April when a balance of 8% reported rises in buyer inquiries rather than falls.
Some professionals put this down to some buyers tightening their belts as the cost-of-living has an effect, and May’s result brings to an end eight months in a row of positive results for new buyer inquiries.
The number of house sales taking place over the next three months is expected to be little changed.
Looking over the next 12 months, expectations point to sales falling, with a net balance of 24% of professionals expecting falls rather than rises.
New instructions to sell homes were also largely flat during May, and there seems to be little respite in terms of a lack of supply in the future, Rics said.
Given constrained supply, house prices continue to rise.
A net balance of 73% of professionals reported an increase in house prices during May.
All parts of the UK continue to see increasing prices, with growth exceptionally strong in Northern Ireland, Northern England and Wales, Rics said.
Although a net balance of 42% of survey participants still envisage house prices being higher in a year’s time, this is down from 78% in February and is the most moderate reading seen since January 2021.
In the lettings market meanwhile, tenant demand continues to rise firmly, Rics added.
At the same time, landlord instructions continue to decline, pointing to rising rental prices.
Simon Rubinsohn, Rics chief economist, said: “The increase in the cost of mortgage finance alongside growing concerns about the economic outlook is unsurprisingly having an impact, albeit a relatively modest one at this point, on buyer activity in the sales market.
“Despite this, prices are viewed as likely to remain resilient into 2023.
“But as is often the case in these circumstances, the pressure is likely to be felt more visibly in transaction levels which are seen as likely to slow as the year wears on.
“Meanwhile, what is particularly striking in the latest Rics survey is both the current and anticipated strength in the rental market.
“New instructions of property to let continue to fall according to respondents to the survey, while demand is still very strong leading to rental levels being bid higher and greater challenges for tenants who aren’t in the position to compete for the available stock.”