The UK housing market is witnessing a surge in optimism, as surveyors and estate agents express the highest confidence in sales volumes in over two years, following the recent General Election. The latest data from the Royal Institution of Chartered Surveyors (RICS) highlights a potential recovery in residential sales and a promising outlook for the housing market.

Optimism on the Rise

The June RICS Residential Market Survey indicates that while activity was subdued leading up to the election, there is increased optimism for the coming months. A net balance of +20% of respondents now predict a recovery in residential sales volumes over the next three months, up from +10% last month. This marks the most optimistic outlook for near-term sales since January 2022.

Tarrant Parsons, senior economist for RICS, noted emerging factors that could support recovery in the coming months. “If the Bank of England decides that the current inflation environment allows for a loosening of monetary policy next month, this could lead to a further reduction in lending rates. Additionally, the recent election provided a decisive outcome, bringing housing to the forefront of the political agenda.”

Election Impact and Future Expectations

The confidence in the newly elected Labour government, which has committed to delivering 1.5 million homes over the next five years, is a significant factor driving this optimism. This target, which has not been achieved since the 1960s, aims to boost the housing market significantly.

Regarding house prices, a net balance of +41% expect prices to increase over the next 12 months, though short-term expectations are tempered by ongoing affordability pressures. The challenge for the new government will be to balance the increase in housing supply with affordability.

Sarah Coles, head of personal finance at Hargreaves Lansdown, commented, “A new government has infused fresh optimism into the property market. Agents are hopeful for a rise in sales and a reversal of falling house prices in the coming year. It’s the most optimistic agents have been about sales since early 2022, with a renewed enthusiasm. However, it remains uncertain if buyers will share this optimism.”

Current Market Trends

Despite the positive outlook, the market faced challenges in June. The flow of new listings slowed, with a net balance reading of -9, and market appraisal levels remained flat. New buyer enquiries saw a net balance reading of -7%, marking the third consecutive month of slowed enquiries. Additionally, the measure for newly agreed sales showed a net balance of -7% in June, a slight improvement from the previous reading of -13%.

In the rental market, a net balance of +28 respondents reported increased tenant demand in June. Conversely, the net balance for new landlord instructions dropped from -3 to -11, indicating a decline in new rental listings. Looking ahead, a net balance of +38 respondents expect rental prices to rise over the next three months, a trend observed since January.

Economic and Political Influences

The optimism isn't rooted in specific campaign promises, as Labour didn't pledge significant policies to boost demand, except for extending the mortgage guarantee scheme for smaller deposits. Instead, agents are hopeful for an upswing in consumer sentiment, buoyed by the optimism that a change in leadership can bring, and the hope for overall improvement in life.

As the UK housing market navigates through the post-election period, the blend of political stability, potential policy changes, and renewed market sentiment suggests a cautiously optimistic outlook for the months ahead.