Demand from prospective home buyers fell in May, which could be a sign that the heat could be coming out of the housing market.
The Royal Institution of Chartered Surveyors (Rics) said property professionals reported that new buyer inquiries fell in May, with a net balance of 7% reporting falls rather than rises.
This was a turnaround from April when a balance of 8% of estate agents reported rises in buyer inquiries rather than falls, and ends an eight-month run of rising inquiries from new buyers.
This decline may show that the cost of living squeeze, and rising interest rates, are hitting the housing market.
Looking over the next 12 months, a net balance of 24% of professionals expected sales to fall rather than rise.
Simon Rubinsohn, RICS chief economist, said rising borrowing costs were weighing on demand:
“The increase in the cost of mortgage finance alongside growing concerns about the economic outlook is unsurprisingly having an impact, albeit a relatively modest one at this point, on buyer activity in the sales market.
“Despite this, prices are viewed as likely to remain resilient into 2023. But as is often the case in these circumstances, the pressure is likely to felt more visibly in transaction levels which are seen as likely to slow as the year wears on.”
RICS also found that demand for rental properties remained high — meaning tenants facing rising bills, with fewer rental properties coming onto the market.
New instructions of property to let continue to fall according to respondents to the survey while demand is still very strong leading to rental levels being bid higher and greater challenges for tenants who aren’t in the position to compete for the available stock.”
Here are the key points from the BCC’s forecasts for the UK economy:
- UK GDP growth forecast for 2022 is 3.5%, 0.6% in 2023 and 1.2% in 2024
- Following Q1 2022 growth of 0.8%, quarter-on-quarter GDP growth is forecast to come to a halt with zero growth in Q2 and Q3, before a 0.2% contraction in Q4 2022.
- Household consumption forecast is for growth of 4% in 2022, growth of 0.6% for 2023 and 1.2% in 2024.
- Business investment forecast is to grow by 1.8% in 2022 before more than halving to 0.8% in 2023, amid the end of the super deduction and the corporation tax rise, and then rising to 1.5% in 2024
- BCC expects export growth of 3% in 2022, 2.3% in 2023 and 1.6% in 2024, compared to import growth of 6.9%, -2.7% and 1.7%
- BCC expects UK unemployment rate of 3.8% in 2022, 3.9% in 2023 and 2024
- CPI inflation is forecast to peak at 10% in Q4 2022, before easing to 3.5% by the end of 2023. Inflation is expected to drop back to the Bank of England’s 2% target by Q4 2024
- UK official interest rates are expected to rise to 2% by Q4 2022 and then to 3% in Q4 2023, ending 2024 at the same level.
Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.
Storm clouds are gathering over the UK economy as soaring inflation, weak business investment, tax rises and global economic shocks all hit growth.
Britain’s economy is expected to grind to a halt this year – and even shrink slightly in the October-December quarter, as the economic outlook deteriorates and inflation hits double-digit levels.
The latest forecast from the British Chambers of Commerce show that quarter-on-quarter GDP is expected to flatline with no growth expected in Q2 and Q3 before contracting by 0.2% in Q4.
Expectations for annual growth in 2022, at 3.5%, are now less than half the 7.5% growth recorded last year. And things are set to get worse, with growth is expected to slow sharply to 0.6% for 2023, before recovering slightly to 1.2% in 2024.
The BCC also cut its forecast for consumer spending this year as the cost-of-living squeeze hits, and almost halved its prediction for business investment.
The downgrade reflects heightened political and economic uncertainty, and rising cost pressures which are limiting smaller firms’ abilities to invest, it says.
Alex Veitch, director of policy at the British Chambers of Commerce, said:
“Our latest forecast indicates that the headwinds facing the UK economy show little sign of reducing with continued inflationary pressures and sluggish growth. The war in Ukraine came just as the UK was beginning a Covid recovery; placing a further squeeze on business profitability.
“The forecast drop in business investment is especially concerning. It is vital that urgent action is taken here, and we are having constructive conversations with the government about its review of capital allowances and other policies to incentivise business investment.
“With inflation forecast to race ahead of wages, we are concerned about a dip in consumer spending which would further impact businesses and hamper growth. We forecast that if trends continue, inflation will only return to the Bank of England’s target rate at the end of 2024, implying a prolonged period of difficulty for the UK.
“Against this backdrop, the government must put in place stable and supportive policies that help businesses pull the UK out of this economic quagmire. Firms must be given confidence to invest, only then can they drive the growth the economy so desperately needs.”
Here’s the full story:
Alarmingly, the OECD is even more pessimistic about Britain’s prospects.
It forecast that economic growth in the UK will grind to a halt next year, and would be the second-worst performing G20 economy after Russia.
And with petrol prices hitting records on a daily basis, there’s no let-up for struggling families.
Coming up today
The European Central Bank’s governing council meets today, after the surging oil price helped to push eurozone inflation at a record high of 8.1% last month.
The ECB is expected to announce the end of its era of ultra-cheap money by ending its bond-buying quantitative easing programme, and signal that interest rates will rise in July for the first time since 2011.
We’ll also get the ECB’s latest economic projections, which will show the impact of the Ukraine war on growth (downward) and consumer prices (upward), given soaring food and energy prices.
Inflation reports from Greece and Mexico, and the latest US weekly jobless report are also on the agenda.
European stock markets are set to open lower, after parts of Shanghai began imposing new lockdown restrictions today in a bid to control COVID-19 transmission risks.
- 10am BST: Greek inflation report for May
- 12pm BST: Mexico’s inflation report for May
- 12.45pm: European Central Bank interest rate decision
- 1.30pm BST: European Central Bank press conference
- 1.30pm BST: US weekly jobless report
Denial of responsibility! galaxyconcerns is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.