Estate agents are forecasting the first increase in house prices in two years, amidst falling interest rates. This optimistic outlook is shared by estate agent members of the Royal Institution of Chartered Surveyors (RICS), who report a growing confidence now that uncertainties around the general election have passed.

RICS has stated that its measure of residential sales expectations over the next three months has accelerated to the highest level since the start of 2022. Consequently, its members anticipate that prices will rise in the near term for the first time in two years.

RICS said: “Looking at price expectations over the next 12 months, a net balance of +54 of respondents believe prices will continue to rise.”

High interest rates and mortgage costs, along with the cost of living squeeze, fuelled by high energy and food bills, have cast a shadow over the property market since 2022. However, the RICS figures suggest the market is about to turn a corner as the economy improves.

The Monetary Policy Committee (MPC) of the Bank of England is expected to cut the base rate from the current 16-year high of 5.25 percent in August, with further reductions later this year. In light of this, a number of high street banks have been reducing mortgage rates and increasing the maximum size of loans available.

For sale sign
Estate agents are forecasting the first increase in house prices in two years

Tarrant Parsons, senior economist at RICS, said: “Although activity across the housing market remained subdued last month, forward-looking aspects did improve slightly,”. If the Bank of England does decide that the current inflation backdrop is benign enough to start loosening monetary policy next month, this may prompt a further softening in lending rates.”

“In addition, the recent election delivered a clear outcome, with housing pushed up the political agenda.”

Labour has promised to build 1.5 million homes over the next five years, a target not met since the 1960s. It is also planning mortgage guarantees for first-time buyers. However, there are serious concerns whether Britain has the construction workers needed to deliver on these promises.

Former RICS chairman, Jeremy Leaf, said: “The election had limited impact on our buyers and sellers, not just because the outcome had been largely factored in but the pace and level of mortgage rate reductions was much more relevant.” Over the past month and particularly since the result, we have seen a rebound in confidence and activity.”

“However, we are not getting carried away as the increased choice and continuing economic concerns will keep the higher price aspirations of homeowners in check.”

Sarah Coles, head of personal finance, Hargreaves Lansdown, said: “A new government has breathed a new air of optimism into the property market.” Agents are hopeful that this could lead to an increase in sales, and a reversal of the falling house prices in the coming year. It’s the most positive agents have been about sales since the start of 2022, and they’re approaching viewings with renewed vigour. However, it remains to be seen whether buyers will share their optimism.”

“Agents are banking on a boost in consumer sentiment, fuelled by the hope that a change at the top can bring about, and the expectation that life in general will improve. We’ll have to wait and see if this comes to fruition and draws more eager buyers into the market in the upcoming weeks.”

“In the meantime, if you’re in the market to buy right now, this is still a buyers’ market, so there should be some good deals available.” If the agents are right, you may need to take advantage of a relatively small window of opportunity. If optimism catches on, you’ll be competing with more buyers and hopeful sellers will hold firm on prices.”