The latest RICS UK Residential Market Survey has found that London was the only place in the UK where more surveyors reported price declines than increases in February, with price rises across the rest of the country re-emerging due to the demand supply imbalance.
While nationally Northern Ireland and Scotland continue to outperform the rest of the UK, there were upward shifts in price growth across the South West and the South East, while London saw its sixth consecutive monthly price decline.
The upward shift in prices is in part being driven by a decline in the number of houses coming onto the market in most parts of the UK, as 8% more surveyors saw declines in new supply in February and new instructions have now fallen in six out of the last seven months.
Price expectations over the next three months increased from a net balance of 3% to 10% and despite anecdotal evidence suggesting that political uncertainty may be leading to the ‘election effect’ of vendors sitting on the fence, the member forecast for house price growth over the next 12 months stand at 2.4% (up from 1.8% in January).
RICS said notable exceptions to the trend however were London, the North of England and the East Midlands, which may indicate that political uncertainty may be weighing more heavily on specific markets.
As supply dips, the national picture of demand appears to be stabilising after seven consecutive months in which the headline reading for new buyer enquiries was negative – a slightly more upbeat trend is also emerging in more parts of the country than previously was the case.
In the lettings market, demand continues to rise, while instructions to let remained unchanged following 10 months of steady declines. This is being reflected in the medium term view for rents with respondents, on average, envisaging an increase of 2.6% over the coming year.
Simon Rubinsohn, RICS chief economist, said: “It is encouraging that that the negative trend in buyer enquiries appears to be dissipating, perhaps in part because of growing confidence that the cost of borrowing will stay lower for longer, but more worrying that instructions to sell property continue to drop. This very modest reversal in the demand picture is already being felt in the key measures of price expectations highlighting the extent of the challenge policy makers will face in addressing the housing crisis in the aftermath of the coming general election.
“Even in London, where the key RICS indicators remain in negative territory, there is a strong view in the survey that property will become even more unaffordable over the medium term. Respondents suggests, on average, that house prices will rise by a further 30 percent in the capital over the next five years.”
