Current pandemic restrictions saw sellers holding off putting their homes up for sale, the February 2021 RICS UK Residential Market Survey revealed, although sales activity is expected to rise in the coming three months, as the lockdown eases.
At the national level, the net balance for new buyer enquiries came in at -9% in February. This is the second consecutive negative monthly figure, but it is "noticeably less downbeat" than the reading of -29% posted in January, the report said.
The number of properties being listed for sale also fell for the second consecutive month, with respondents anecdotally citing the lockdown restrictions and waiting on clarity about the stamp duty holiday extension for the reasons behind the fall in appetite.
This lack of demand from buyers and sellers saw a broadly flat trend in newly agreed sales, with a net balance of 1% of respondents reporting a rise in completed sales.
Ahead of chancellor Rishi Sunak's budget announcement, respondents to the January survey anticipated sales would slow in the coming months as the stamp duty holiday was supposed to end by 31 March (although Sunak has now extended it).
Near term sales expectations moved into positive territory at 6% this month, the strongest reading since October last year.
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Sales volumes are expected to grow over the next 12 months as a net balance of 16% of respondents anticipate an increase, the strongest since February 2020.
Looking at house price growth, 52% of respondents reported an increase in prices in February, up from 49% in January. The measure is indicative of house price inflation maintaining momentum, the report said.
Looking ahead, prices are predicted to climb over the coming year, as 46% of respondents anticipate a rise, up from 30% in January.
In the lettings market, a net balance of 26% of respondents cited an increase in tenant demand in the three months to February. At the same time, -28% of respondents reported a fall in landlord instructions.
Off the back of this "mismatch," rental growth expectations have strengthened, with 37% of respondents believing rents will increase in the coming three months.
Rents are expected to rise by little over 2% for the coming year. They are projected to rise across all parts of the UK, except for London, where respondents expect them to remain the same.
Last week, Sunak extended a stamp duty holiday in England and Northern Ireland in his 2021 budget, as well as unveiling new mortgages with just 5% deposits.
The threshold for stamp duty, a tax on property transactions in England and Northern Ireland, will remain at £500,000 ($698,558) until 30 June for residential purchases. It means buyers avoid the levy altogether on purchases under that amount. It will then only fall to £250,000 for another three months, before returning to its standard £125,000 rate.
Simon Rubinsohn, RICS chief economist, said these measures "should help support the housing market over the coming months with concerns around a cliff edge end to the stamp duty break eased."
However, he added that "a very clear message emanating from the latest survey is that more needs to be done to address the shortfall in supply with price and rent expectations very evidently continuing to accelerate."
He said planning reform alongside supporting a sustainable and inclusive recovery in the economy are crucial in encouraging the private sector to increase the pipeline of new build.
But he said it is also important that a "holistic approach is taken to the housing market ensuring that policy is designed to deliver across tenures and indeed to improve the environmental quality of the existing stock through a retrofit programme.”
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