RICS has reported a “renewed deterioration” in near term expectations for the residential property market, with respondents anticipating a decline in activity over the next three months.
Brexit uncertainty is again highlighted as a significant factor causing hesitation amongst buyers and vendors. Nevertheless, a more stable trend in sales is envisaged at the 12-month horizon.
Following a couple of months in which new buyer enquiries increased modestly, August saw a flatter trend in demand at the national level. Indeed, a net balance of just +3% reported a rise over the month, with a reading so close to zero indicative of virtually no change.
Meanwhile, on a UK-wide basis, the Newly Agreed Saled series inched slightly further into negative territory in the latest results (net balance -8% compared to -6% previously). When disaggregated, most areas posted a flat or negative sales trend in August, with the East Midlands and South West regions displaying the weakest momentum over the survey period.
At the other end of the scale, Wales and the North East of England appeared to buck the national trend, as respondents reported a solid increase in activity over the month. Back at the national level, the average time taken to conclude a sale, from initial listing to completion, now stands at an average of roughly 18 weeks (slightly improved on the duration of 19 weeks being reported at the start of the year).
Looking ahead, the near term sales expectations net balance fell from -4% to -23%, representing the poorest return since February this year. Furthermore, sales expectations have weakened in almost all parts of the UK over the past two months. Beyond the next three months, respondents foresee activity stabilising at the 12-month time-frame. At the national level, a net balance of +5% of survey participants expect sales to rise over the year ahead, although this is down from +12% and +22% in July and June respectively.
Alongside this, new instructions to sell were more or less flat once again in August, marking the third consecutive report in which the volume of fresh listings coming onto the market has seen little change. However,contributors continue to report that the number of appraisals being undertaken is down compared with the same period a year ago. Moreover, appraisals are reportedly down on a year on year basis across all parts of the UK, pointing to a relatively weak pipeline for instructions going forward.
The generally subdued trends in activity over the past month have ensured price pressures remain muted across country as a whole. The headline RICS Price net balance came in at -4% in August, suggesting house prices were largely unchanged. Even so, the latest reading is slightly higher than -9% posted in July, signalling some downward momentum has abated for now.
At the regional level, respondents across London, the South East and East Anglia continue to report an outright decline in prices, while the North East also returned a negative reading this month. Conversely, according to respondents in Scotland, Northern Ireland and Wales, house price inflation remains firm in their localities.
Regarding the near term outlook for prices, expectations are negative at the national level, with a net balance of -24% of survey participants anticipating a decline over the coming three months (down from -13% last time out). Nevertheless, at the 12-month time horizon, a net balance of +12% of respondents project prices will increase, once again led by the strongest sentiment in Northern Ireland, Scotland and Wales. On the same basis, prices are still seen falling in London, although expectations point to a steadier trend emerging in the South East and East Anglia.
In the lettings market, the August results show tenant demand increased for an eighth month in succession, as a net balance of +23% of contributors cited a pick- up (non-seasonally adjusted figures). Set against this, landlord instructions remain in decline, an ongoing trend stretching all the way back to 2016. Given the consistent imbalance between rising demand and falling supply, rents are seen being squeezed higher over the next three months. In fact, near term rental expectations are now positive, to a greater or lesser degree, across all parts of the UK.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “These figures are disappointing bearing in mind their historic accuracy but they are not a lot different from what one would expect in August, particularly in view of continuing political uncertainty.
“On the ground, we have seen plenty of caution and many buyers and sellers sitting on their hands. However, longer-term buyers of smaller houses have been looking beyond Brexit and taking on view on likely price movements.
“Other recent market surveys bear out this trend – in other words, the market is showing more resilience than we might have dared hope. Certainly, we are not finding buyers and sellers withdrawing from transactions because of worries about an imminent market correction.”
Benson Hersch, CEO of the Association of Short Term Lenders, added: “Despite some cause for optimism in recent months, the latest RICS Residential Market Survey confirms a market that continues to be defined by uncertainty and low transaction volumes. This environment can lead to broken chains and prove problematic for developers who need longer to market their properties.
“In this situation, fast and flexible short-term finance can prove an invaluable tool for brokers, helping their clients to keep transactions alive and investors to bridge this difficult period. In an uncertain environment, certainty of funds becomes even more important and we continue to hear stories of lenders unable to complete on loans they have previously agreed. So, brokers need to factor this into their choices and identify lenders they can be confident will be able to deliver certainty.”