RICS UK Residential Market Survey for May has found enquiries, instructions and sales all declining over the month.
In addition, price growth (although still positive) appears to have lost momentum in the latest report and expectations suggest a further cooling is likely in the near term, RICS said.
The General Election is again commonly cited as a factor hindering activity, causing some hesitancy from both buyers and vendors.
The headline price growth indicator moved from +22% to +17%, the softest reading since August 2016, but still consistent with modest gains nonetheless. Beneath the national trend, prices continue to slide in London, with the price growth gauge remaining entrenched in negative territory for a fourteenth consecutive month. Away from the capital, house price inflation in East Anglia has moderated noticeably since the start of 2017, with little change now reported in each of the last two months. Elsewhere, prices continue to rise to a greater or lesser degree across all other UK regions/countries.
Looking ahead, the near term price expectations series slipped to -1% from +5% in April (the third straight report in which this indicator has softened). London continues to exhibit sentiment more negative in comparison to all other parts of the UK, although, at the 12 month horizon, the outlook is more or less flat.
Expectations point to potential weakness across the South East in the near term, but signal a return to solid growth 12 months ahead. Overall, the national 12 month expectations net balance remained solid, at +54%. Further out, over the next five years, respondents envisage house price inflation averaging 3.5% per annum across the UK as a whole.
A sheer lack of supply continues to support prices for the time being, and the sustained deterioration in new sales instructions over the past two years shows no sign of abating.During May, 25% more respondents cited a decline in fresh listings (compared to those noting an increase), producing the most negative reading since July 2016.
Although a fall in new instructions is a recurring theme, RICS said anecdotal evidence suggests this month’s drop may have been exacerbated by the General Election, as some vendors adopt a wait and see approach. Consequently, stock levels remain stuck at all-time lows with the average number of unsold homes on estate agents’ books at 43.
Alongside this, new buyer enquiries fell modestly at the national level, having remained stagnant over much of the past six months. As with new vendors, a large portion of contributors suspect the General Election is having an adverse impact on demand, although some appear more sanguine about the effect. At the same time, agreed sales continued to decline for a second month running as the national indicator returned a net balance of -8% (compared to -9% previously). Despite the slight drop in sales, the average time taken to complete a transaction held steady at 16 weeks in May.
Going forward, near term sales expectations continue to imply transactions will see little change over the coming three months. Looking beyond this, over the next 12 months, respondents appear slightly more optimistic on the outlook for sales growth, with a net balance of 26% anticipating an increase in activity. Nevertheless, this remains somewhat subdued in comparison to the long run average reading (since the series was started in 2012) of +38%. When broken down, respondents in the South West of England and Wales display the most upbeat view on the prospects for sales over the next 12 months.
In the lettings market, tenant demand rose only marginally (on a non seasonally adjusted basis), with the pace of increase the most moderate since December 2016. New landlord instructions were again broadly at, while 17% more respondents nationally expect rents to rise (rather than fall) over the coming three months. In terms of 12 month expectations, contributors are pencilling in around 2% headline rental growth over the year ahead.
Again, London remains an exception to the national picture. Near term expectations are still negative in the capital, an ongoing trend stretching back to August 2016. At the 12 month horizon, London rental projections are broadly at and have not shown any improvement in recent months.
Richard Sexton, director at e.surv, said: “The market has been flatlining for a while now, particularly in London and the South East, arguably with a lack of affordable housing for first time buyers being the main catalyst for this.
“Regardless of the outcome of today’s election, whichever political party is in power has to make sure that housing is a top priority. The UK’s housing stock has been stagnant for too long and if more affordable homes aren’t built, things will only get worse. We urge the Government to start working closely with the industry to give more people the opportunity to become homeowners.”
