RICS’ residential market survey for September 2015 indicated that house sales picked up across the UK in September, supported by a modest improvement in the availability of mortgage finance.
Across the UK, agreed sales rose at the quickest pace since May 2014, with 14% more chartered surveyors seeing a rise. This is a 16 month high and the fifth consecutive month that sales have increased.
The North, East Anglia and Scotland posted the sharpest rises in activity over the month with the East Midlands the only region to see a material drop in sales albeit following an increase in the region in August.
RICS said the stronger sales trend in the UK is broadly reflective of an upturn in demand which has been visible in the data since the early spring. Indeed, the number of new buyer enquiries rose for a sixth consecutive month across the country with 18% more chartered surveyors reporting a rise in demand.
The pattern being seen by chartered surveyors echoes recent lending data including that highlighted by the Bank of England, showing mortgage approvals at an 18-month high and up 12% compared to a year ago.
As the availability of mortgage finance appears to be improving, the average ‘perceived’ LTV ratio captured by respondents to RICS’ survey edged up to 79.3% with first time buyers seeing credit conditions relax most noticeably over the month.
Although activity is picking up, the ongoing lack of new instructions and the resulting limited stock on the market continue to be an issue for the sustainability of the market. The number of new instructions has fallen in 13 of the last 14 months.
RICS said that, significantly, 40% of respondents feel the biggest factor behind the negative trend in new instructions is the lack of stock already for sale which is deterring would be movers as they struggle to find a suitable property to move on to. The next most cited influence was economic uncertainty, followed by stretched affordability.
As a result of the persistent supply demand imbalance, the national house price indicator continues to rise strongly which is likely to be reflected in key house price indices over coming months and into the first half of 2016, the organisation stated.
In the lettings market, tenant demand increased once more continuing the pattern seen by respondents since December 2014, and while new landlord instructions increased slightly for the third month in a row, they were still significantly outstripped by tenant demand. Over the next 12 months, chartered surveyors are forecasting rents to rise by 3% at the headline level.
“As consumer demand holds strong, housing transactions have risen to their quickest pace in 18 months,” said Brian Murphy, head of lending at Mortgage Advice Bureau (MAB).
“Although house prices are still rising, they are doing so at a far more moderate pace compared to last year, and more than two thirds of respondents to the RICS survey agree prices are at or below fair value. Combine this with record low mortgage rates and significantly improved product availability and it’s no surprise there has been a pick-up in housing activity.
“However, the market is not without its hurdles – the deficiency of available homes still threatens to derail recent progress. The number of new property listings has now fallen for thirteen of the past fourteen months, with a lack of stock cited as the main deterrent for would-be movers. A healthy housing market has movement all the way up the property chain, and this trend threatens to cause a logjam that will make it harder for first-time buyers to become homeowners.
“The creation of new homes is a clear priority for both industry and government, and it is encouraging to see the Conservative Party pledging to do more to increase levels of homeownership at this week’s party conference. However, the 200,000 starter homes pledged must be in addition to current housebuilding levels if it is to make any discernible difference. The government must also involve lenders in its discussions to create an effective long-term housebuilding strategy.”
