House price growth has been gaining momentum but mortgage rates may curtail the recovery in housing market activity “before long”, according to surveyors.
A net balance of 25% of property professionals reported house prices rising in November, increasing from a balance of 16% observing a rise in October, the Royal Institution of Chartered Surveyors (Rics) said.
The findings mark the fourth consecutive month of rising prices.
Professionals expect house prices to continue rising over the next three and 12 months, the report said.
New buyer inquiries and new instructions to sell properties also increased in November, although the volume of sales being agreed remained broadly unchanged, Rics said.
A net balance of 19% of professionals predict an increase in sales activity over the next three months.
But market appraisals in November were on par with levels one year ago, which could signal a potential slowdown in the pipeline of new listings moving into 2025, the report added.
Meanwhile, tenant demand declined slightly in November, marking the first decrease recorded since 2020, Rics said.
Measures of consumer and business confidence across the economy have deteriorated of late and, if sustained, this could begin to feed through into housing market conditions in the months ahead
A net balance of 1% of professionals saw rental sector demand fall, which may reflect seasonal factors, Rics suggested.
Landlord instructions continued to fall, with a net balance of 13% of professionals reporting a decrease, contributing to the rental sector’s imbalance between supply and demand.
Despite the slower demand, rental prices are forecast to edge higher, with a net balance of 29% of professionals expecting increases in the near term, Rics said.
Tarrant Parsons, Rics senior economist, said: “Although the latest survey results continue to signal a steady improvement in buyer demand across the residential market, the broader macro environment is likely to pose additional headwinds moving forward.
“Most significantly, the recent rise in mortgage interest rates may curtail the recovery in market activity before long and this is reflected in the slightly less optimistic sales expectations data coming through this month.
“Moreover, measures of consumer and business confidence across the economy have deteriorated of late and, if sustained, this could begin to feed through into housing market conditions in the months ahead.”
We expect a busier year in 2025
The report was released as Rightmove predicted the average price tag on a home will increase by 4% by the end of 2025.
The property website said next year is expected to be a “buyer’s market” with sellers facing strong competition.
Rightmove’s property expert Tim Bannister said: “We expect a busier year in 2025, with around 1.15 million transactions completed.”
He said changes to stamp duty in England and Northern Ireland from April mean “we are likely to see a particularly busy first three months of the year”.
House price growth and transaction activity will feel more sustainable once the economy is heading decisively in the right direction
He added: “The effects of stamp duty rising will be felt for the rest of the year too and we may see some negotiation tactics play out.”
Tom Bill, head of UK residential research at Knight Frank said: “We recently revised down our UK house price forecasts to reflect the risk that inflation and mortgage rates will stay higher for longer.
“House price growth and transaction activity will feel more sustainable once the economy is heading decisively in the right direction.”
