Demand for housing drops off amid cost of living squeeze

Despite this, house prices are expected to rise in the short-term, says the RICS.

UK surveyors have reported a fall in buyer enquiries for May, indicating a fall in demand for housing, according to the Royal Institution of Chartered Surveyors (RICS).

The reported decline in buyer demand is the first registered in its UK Residential Market Survey, which was released today, in eight consecutive months.

“The RICS survey indicated a fall in demand from prospective housebuyers in May 2022, which could be considered a potential side effect of the rising cost of living and higher interest rates that have made it more difficult to access the housing market,” said Walid Koudmani, Chief Market Analyst at XTB, a financial brokerage company.

Despite this drop in demand, the RICS believes the price of houses will rise in the short-term due to a limited supply of properties.

“House prices are rising and are unlikely to slow in the short term, this means would-be buyers may find they need to wait longer to build a deposit,” said Rachel Springall, Finance Expert at Moneyfacts.

Saving for a more expensive deposit is not as easy as increasing these monthly contributions. It is key to consider the increased spending would-be buyers are committing to essential expenses such as utilities and transport.

“Due to the rising cost of living, aspiring homeowners may find it difficult to make bigger monthly savings towards a deposit, especially if they are spending a large portion of their salary on rent,” Springall further explained.

While the latest monthly survey also found that rent is expected to grow faster than house prices, some landlords have taken advantage of the record-high house prices by selling their properties.

“Landlords who were left hit by the pandemic are now facing a cost of living crisis, so it’s not too surprising to see some have sold off property from the private rented sector and have decided not to return due to these challenges,” explained Springall.

In addition, she mentioned that tax changes and rising interest rates have been squeezing profit margins for landlords, leading some to consider leaving the market.  

This is a belief which is also held by Sarah Coles, Senior Personal Finance Analyst at Hargreaves Lansdown, an investment platform.

“Some [landlords] feel we’ve reached the top of the market and are keen to capitalise on higher prices while they can. Others are worried about more legislation and higher taxes making renting less rewarding,” she elaborated.