Demand for residential property in Scotland fell for the sixth consecutive month in October but prices continued to rise as fewer new properties came to the market.
According to the latest RICS Residential Market Survey, instructions from landlords also fell last month. With tenant demand continuing to rise at a "relatively solid pace", rental prices are expected to be driven higher in the near-term.
RICS chief economist Simon Rubinsohn said the latest feedback is further evidence of buyer caution in the face of the sharp rise in mortgage costs.
"As a result, the volume of activity is likely to slip back over the coming months and realistic pricing is now much more important to complete a sale," he said.
"The settling down in financial markets could provide some relief although it may be premature to assume this will be reflected in a reduction in lending rates anytime soon. However, the employment picture remains critical to the medium-term outlook and for the time being, that remains solid."
He added: “As far as the lettings market is concerned, the imbalance between demand and supply still appears unusually extended leading to rent expectations in the survey remaining at elevated levels and it is difficult to see this changing anytime soon in the current environment."
The survey found a net balance of -45 per cent of surveyors in Scotland reporting a fall in new buyer enquiries in October. A net balance of -48% of surveyors reported that newly agreed sales were also in decline.
READ MORE: Falling house prices will bring renters limited comfort
Supply levels also eased with a net balance of -43% of respondents stating that new instructions to sell had fallen, indicating there is less stock available to new buyers. However, a net balance of +36% of respondents said residential property prices rose over the past three months.
“Certain sectors of the market are still performing well, particularly well-presented properties in good condition," said Alan Kennedy of Shepherd Chartered Surveyors in Fraserburgh.
"Demand will, however, be impacted by increasing mortgage rates. Unpredictable times ahead.”
The easing in both demand and supply weighed on surveyors' outlook with a net balance of -12% expecting sales to fall during the next quarter, and a net balance of -38% expecting that prices will fall as well.
READ MORE: Rental prices surge in Glasgow and Edinburgh
In the lettings market, tenant demand continued to rise with a net balance of +24% noting an increase in October. At the same time, landlord instructions fell.
Given the mismatch, rents are expected to be driven higher over the near-term, returning a net balance reading of +19%. This however has eased from +58% in the previous survey.
Thomas Baird of Select Surveyors in Glasgow said: “The property market is clearly facing a period of instability and the upcoming six months are expected to be slow with potential for 12 months of stifled conditions, withdrawn mortgage products and high interest rates.”
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