Recovery in the British Real Estate Market, but Rental Sector Under Pressure

The British real estate market shows signs of recovery, as evidenced by surveys from property assessors. House prices, sales, and inquiries have increased over the past month. At the same time, the rental sector remains under strong pressure, as tenant demand continues to outstrip the supply of available rental homes. The Royal Institution of Chartered Surveyors (RICS) reported that the central house price balance, which measures the difference between increases and decreases in house prices, moved into positive territory for the first time since October 2022. In September, the balance climbed to +11, after standing at zero in August. This exceeded economists' expectations, who had forecasted a value of +4 in a Reuters survey. A net result of +54 of the surveyors expects house prices to rise in the coming year, the strongest figure since April 2022. The expected sales for the next twelve months have also improved, rising to a net balance of +45, compared to only +3 a year ago. According to Tarrant Parsons, head of market analysis at RICS, the reduction in borrowing costs in August has stimulated buyer demand. Further monetary policy easing is expected in the coming months, which should create a more favorable environment for the real estate market. The Bank of England's benchmark interest rate currently stands at 5%, following the first rate cut in four years in August. The British central bank left rates unchanged last month, but investors see about an 83% chance of a quarter-point cut on November 7. Other indicators also signal a recovery in the British real estate market, facilitated by the expected further rate cut by the Bank of England. Figures from mortgage provider Halifax show that house prices rose in September at the fastest annual rate since the end of 2022. RICS noted that a possible increase in capital gains tax in the new Labour government's first budget at the end of this month has prompted some homeowners to sell their properties, leading to a shortage of rental units. Demand in the rental market continues to rise, and rents are expected to increase in the coming months. Finance Minister Rachel Reeves warned that some taxes could be raised in her first budget on October 30.