Optimism in the property market has been “crushed by the relentless rise in mortgage rates”, according to Hargreaves Lansdown head of personal finance, Sarah Coles.
Research from the Royal Institution of Chartered Surveyors found recovery in buyer demand has mellowed, with the market seeming to have been impacted by the slight increase in mortgage rates over the past few weeks.
New buyer enquiries dropped from +6 to -1 in April, marking the end of three consecutive positive monthly results, and thereby indicating a more stagnant market.
The regional feedback on buyer demand was also found to be "mixed", with a notable loss of momentum mainly seen in London and Southern parts of England.
Coles argued the findings indicate a “buyers’ market except for the fact there are so few buyers”.
“The first three months of the year saw cautious buyers emerge from the woodwork,” she explained.
“Falling mortgage rates in January persuaded them to dip their toe into the pool of properties. It also saw sellers flock back to the market, and for-sale signs sprang up across the country.
“However, as mortgage rates have risen steadily since, it has squeezed buyers out again, leaving these properties unviewed and unloved.”
Coles additionally explained that, for those who can afford to buy right now, there’s plenty on offer, and room to drive a hard bargain.
“With prices set to remain vulnerable, buyers will be keen to haggle, to protect themselves against more price weakness in the coming months,” she stated.
“However, others will decide to crawl back into the woodwork and wait for mortgage rates to drop.”
The research also examined the number of properties available on the market, with +23 of respondents noting an increase in new instructions since April.
This represents the most positive figures since September 2020, as sellers are likely to feel more comfortable in listing their properties as current market conditions continue to improve following the pandemic.
Similarly, the agreed sales indicator also improved slightly in April, with a net balance reading of +5 compared to -5 last month.
While this marks the most positive reading since May 2021, it only shows a minimal increase in monthly sales.
Rics chief economist, Simon Rubinsohn, said: “A modest back up in mortgage pricing has contributed to the flatlining in the buyer enquiries metric over the past month, as well as the slightly more cautious signals around near-term expectations.
“That said, there is still a strong perception that activity in the market will pick up in the latter part of the year and into 2025, irrespective of any political uncertainty around the general election.
“As far as the lettings market is concerned, an increasing number of respondents are also drawing attention to affordability constraints, and this is reflected in a more modest pace of rental growth.
“But a fundamental problem in the market across much of the country remains the imbalance between demand and supply with new instructions continuing to decline.”
