RICS: “Property market is moving but bond yields and Stamp Duty remain a risk”

RICS has published its UK Residential Market Survey for October 2024, showing property market is moving but bond yields and Stamp Duty remain a risk.

Agreed sales and buyer enquiries are set to rise in the coming months ahead of Stamp Duty changes but the market may weaken once the property tax thresholds drop, the Royal Institution of Chartered Surveyors (RICS) claims.

It comes as the latest RICS UK Residential Market Survey for October 2024 found agreed sales and new buyer enquiries saw a further rise last month despite the Autumn Budget.

The professional body suggests falling interest rates and a rush to move before Stamp Duty thresholds drop at the end of March may be boosting the market, while activity may slow after transaction costs rise in April.

RICS said property market activity will still be busy in the short-term, but warns a rise in bond yields in recent weeks following the Autumn Budget is likely to present “something of a headwind as it feeds through into general lending conditions.”

Tarrant Parsons, head of market analysis for RICS, said:

“The UK housing market saw a continued pick-up in activity through October, with the recent improvement in buyer demand translating into growth in the number of sales being agreed.

“Just as importantly, forward-looking sentiment points to this brighter trend remaining in place of the coming months.

“That said, the rise in bond yields following the Budget, alongside a general increase in financial market implied interest rate expectations over the past couple of weeks, will likely present something of a headwind for the market to contend with over the short term.”

The headline net balance for the new buyer enquiries gauge registered a reading of +12% in October, little changed from +13% previously.

This extends a run of positive returns for the series into a fourth consecutive month, RICS said.

An aggregate net balance of +9% of respondents reported an increase in sales volumes over the latest survey period, up from a figure of +5% recorded for September. This now marks the third successive reading in positive territory.

A net balance of +34% in October said they expect sales to rise over the next three months, up from a figure of +22% beforehand. Similarly, a net balance of +36% of contributors see sales volumes rising over the next twelve months, a slightly more modest reading compared with +44% seen in September. A net balance of +14% reported a rise in new instructions, suggesting an increase in the flow of properties coming onto the sales market.

Respondents also noted a greater level of market appraisals being undertaken compared with 12 months ago.

Looking at house prices, a headline net balance of +16% of survey participants reported a rise in October, up from readings of +11% and zero in September and August respectively.

A rising share of respondents now think house prices will continue to move higher over the coming three months, with the net balance for this indicator moving to +20% from +12% previously.

Moreover, virtually all parts of the UK are expected to see a rise in house prices in the year to come, led by continued robust growth across Northern Ireland and Scotland.

Tina Paillet, president of RICS, said:

“The growth in residential sales could be further supported by recent interest rate announcements by the Bank of England.

“Meanwhile, the pending expiration in the higher Stamp Duty threshold in spring 2025 may cause homeowners and first-time buyers to rush to take advantage of the current rate, but this will likely be followed by a weaker trend after the deadline has passed.”

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