Homebuyer enquires in Scotland fell again during August as wider economic challenges impacted further on market conditions.
The latest Royal Institution of Chartered Surveyors (RICS) Residential Market Survey showed that house prices in Scotland continued to rise, albeit at a less firm rate, but enquires, sales and new instructions all dropped, continuing a downturn in activity that has been evident for several months.
Looking at new buyer enquiries, this is the fourth consecutive month of negative readings, with a net balance of -25% of Scottish respondents recorded.
As for agreed sales, a net balance reading of -19% was posted in August, and sales predictions for the three months ahead also slipped further into negative territory - down by 15% in August compared to a 9% drop in July.
Looking forward, sales expectations have also now been negative for four consecutive months, with a net balance of -29% in the latest survey.
In terms of supply, the continued lack of homes coming onto the market is illustrated by the new instructions indicator being in negative territory for the 13th consecutive month.
This lack of supply has been a crucial factor in underpinning growth in house prices. A net balance of +32% of Scottish respondents reported an increase in house prices during August, down from +51% in July, but comfortably above the long run average.
Scottish respondents on balance expect prices to be higher in a year’s time as well, with 12-month price expectations easing in recent months, from a net balance reading of +76% back in February to a figure of +37% in the latest results - although they remain higher than most other UK regions.
Craig Henderson, a chartered surveyor with Graham & Sibbald in Ayrshire, said: “As increasing inflation rates affect confidence, we are seeing caution being exercised in most market sectors, but demand still appears to outstrip supply.
“This is likely to continue through the autumn months, but increasing energy bills may affect confidence - it could be an interesting few months ahead.”
John Brown, owner of John Brown And Company in Edinburgh, said: “Expected caution is now more obvious as buyers react to cost increases but demand is still positive.
“The market for flats of which there are always more for sale is sensitive to pricing and purchaser ability to complete, while family housing with limited supply line is still competitive - quieter times ahead.”
Tarrant Parsons, senior economist at RICS, commented: “Concerns over the economic backdrop and rising interest rates continue to take their toll on market momentum, with strong activity early in the year now giving way to a more subdued picture.
“Moreover, given projections for the UK economy point to a potential recession emerging towards the end of 2022, respondents envisage housing sales continuing to slip in the coming months.
“For the time being at least, the lack of stock available on the market is still providing support to house prices, which continue to rise, even if the pace of growth has cooled over recent months.”
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