RICS has revealed that residential sales activity stuttered in December, having appeared to be gaining momentum over recent months.
Respondents to its monthly survey have been paring back their expectations for the near term growth in transactions. Nonetheless, this does follow a string of reports in which confidence in the outlook improved steadily and it remains to be seen whether or not this is a temporary setback or the onset of a weaker trend.
While new buyer enquiries rose for a fourth month in succession (on a seasonally adjusted basis), the increase was only marginal during December, RICS said. Meanwhile, new instructions to sell failed to see any pick-up, marking the tenth straight month without any improvement in the flow of fresh listings at the national level. As such, contributors continue to highlight low stock levels as a key concern and a lack of choice for would-be buyers is seen to be weighing on activity.
The national newly agreed sales indicator eased back to -1%, following a stretch of mildly positive readings since August, suggesting transaction volumes were more or less unchanged over the month. However, some parts of the UK were reported to have seen a rise in sales, as Wales, the South West, and the North East all registered positive balances.
Looking ahead, near term sales expectations moderated noticeably, with a net balance of only +4% of respondents anticipating an increase in sales during the coming three months (down from +18% previously). Further out, however, respondents’ 12-month sales outlook was largely unchanged at the headline level. Indeed, 32% more contributors expect sales to rise (rather than fall) over the year ahead, compared with 31% in the November survey. Within this, Scotland and Northern Ireland returned the strongest twelve month projections, although expectations sit comfortably in positive territory in all parts of the UK.
Meanwhile, the headline price balance came in at +24%, following a reading of +29% in November. RICS said that while this measure continues to suggest house prices are rising relatively firmly at the national level, the latest reading does end a run of four successive months of higher house price balances. The disaggregated data shows London as the only area where prices are falling (the price indicator across the capital has remained in negative territory for ten consecutive months). At the other end of the scale, respondents in the North West of the country reported the strongest price growth relative to all other areas, with +55% more respondents noting an increase in prices (rather than a decline).
With regards to the outlook, near term price expectations softened for the second consecutive report, suggesting immediate price pressures may be easing slightly given slower demand growth. Notwithstanding this, at the 12-month horizon, a net balance of 49% of respondents anticipate prices will increase. This is up on the comparable reading of +40% previously and was the strongest return since May. When broken down, all parts of the UK are expected to see higher prices over the year ahead although expectations remain relatively subdued in Central London.
In the lettings market, tenant demand (non-seasonally adjusted) increased marginally across the UK as a whole while new landlord instructions were more or less at. Rents are being squeezed higher due to demand consistently running ahead of supply. This trend is expected to continue both in the near term and further out, with respondents projecting rental growth to average close to 5%, per annum, over the next five years.
RICS said the feedback on the lettings market in London continues to contrast with the national picture. Indeed, demand reportedly fell for a fourth month in a row (and for an eighth month out of the past 12). Consequently, rents are expected to come under some downward pressure in the near term, although the 12-month outlook is broadly at. Over the next five years, rental growth in London is expected to strengthen but significantly, it is still projected to increase at a lesser rate than the UK average.
Richard Sexton, director of e.surv, said: “Although activity flattened last month, this is typical around the festive period as many buyers wait to restart activity in the new year.
“However, even if demand has softened, the problem remains on the supply side. New instructions remain sluggish and with annual house prices rising at an unsustainable rate, too many prospective new buyers are being priced out of the market.
“A new year means new opportunities for change. As we await the government’s Housing White Paper, hopefully further initiative and funding will be applied to help secure home ownership for many hard-working earners.”