The Royal Institutions for Chartered Surveyors (RICS) have expressed a more positive outlook for house prices, despite rising interest rates that are expected to impact buyers’ affordability.
RICS’s reported that new buyer inquiries, prices, and expectations for the market were all less negative in May compared to previous months.
Despite their positive outlook for the property market, RICS warned that an increase in mortgage rates could constrain the market in the future. While new buyer inquiries registered at minus 18% in May, the least negative reading in a year, the measure of house prices rose to minus 30%, marking the third consecutive increase.
Surveyors were neutral about the outlook for prices over the next year. This contrasts with reports from mortgage lenders Nationwide Building Society and Halifax, which have shown a decline in house prices.
Mortgage rates have risen recently due to higher-than-expected inflation, causing concern that it may weigh on the market. RICS noted that the banking sector expects this, as many banks and building societies have already introduced products with higher interest rates.
While economists have warned of a potential 10% slump in property prices this year, limited supply and a strong labour market provide some support. RICS’s report also indicated an increase in houses coming to the market, with new instructions to sell property reaching the strongest level since March 2021.
David Hannah, Chairman at Cornerstone Group International said, “While surveyors are showing a slightly more positive outlook for UK house prices, the looming threat of rising mortgage rates is likely to dampen the market in the coming months.
“Stubbornly high inflation is expected to trigger further interest rate increases, leading to higher mortgage rates and reduced affordability for buyers.
“The recent increase in mortgage rates, driven by higher-than-expected inflation, has already reached the pain threshold for consumers. However, I remain confident in the UK property market. Historically, it has been more stable than any other global property market.”