RICS UK Residential Survey for April 2021 reveals that respondents frequently highlighted the mismatch between supply and demand to be a critical factor in driving up house prices, with growth reportedly accelerating further across all parts of the UK.
In terms of new buyer demand, a headline net balance of +44% of contributors cited a pick-up in enquiries during April. This is virtually unchanged from a reading of +43% previously and therefore remains indicative of a solid uptick in buyer demand, RICS said. In addition, the new buyer enquiries series is positive, to a greater or lesser degree, across all areas of the UK.
Alongside this, newly agreed sales also rose over the month, evidenced by a net balance of +34% of respondents noting an increase (a slight easing on +48% last time). Looking ahead, near term sales expectations remain comfortably positive at the national level, posting a net balance of +23%. With regards to the 12 month view, contributors anticipate a cooling in sales growth further ahead, with the headline net balance standing at just +12%. When disaggregated, sales expectations for the coming year are significantly stronger than the national average in Northern Ireland, Scotland and London.
RICS said a widely cited theme in the comments left by survey participants is that the number of fresh listings arriving on the market is insufficient to match the current levels of demand. Indeed, the net balance for new instructions fell to -4% in the latest results, down from +21% previously. Moreover, stock levels have dropped in recent months, with the average number of properties on estate agents’ books now at just 40, having briefly stood at 46 back in December.
The survey’s headline measure of house price growth rose again over the month, with a net balance of +75% of respondents noting an increase in prices during April. This is up from a reading of +62% back in March and has now become successively more elevated in each of the last three reports. Furthermore, all UK regions/countries are now seeing a sharp pick-up in house price inflation.
Looking ahead, the near term price expectations net balance came in at +47%, marginally higher than the reading of +43% posted last time, and still consistent with strong house price growth being maintained over the coming three months. Further ahead, respondents also foresee upwards pressures on prices remaining firm at the 12 month time horizon, with the latest net balance standing at +68%.
In the lettings market, tenant demand growth accelerated markedly in the three months to April (seasonally adjusted quarterly series), registering a net balance reading of +60% across the UK as a whole. This is up from a balance of +14% back in January, with RICS saying that the latest pick-up likely aided by the general improvement in the Covid situation across the UK since then, as well as the recent easing in lockdown restrictions. Nevertheless, a tight supply backdrop is also evident across the rental market, as new landlord instructions were more or less stagnant over the latest survey period.
Near term rental growth expectations also rose sharply, returning a net balance of +55% in April, compared to a reading of +15% over the previous quarter. Over the next 12 months, respondents envisage rents rising by 3% on average across the UK. Although near term expectations remain marginally negative across London, the 12 month view on rents moved slightly into positive territory for the first time since early 2020.
Sundeep Patel, director of sales at specialist lender Together, said: “After a more cautious start to the year, the latest market activity survey paints a very different picture, with sellers enthusiastically listing their properties and buyer enquiries and sales activity indicating a continued uptick in buyer demand. Indeed, house price growth spiked again in April, with a net balance of +75% of surveyors reporting an increase in prices, up from +62% in March.
“That said, considering the end of the £500K taper for Stamp Duty next month, mortgage holidays winding up in July, and potential for international travel, we may see demand start to cool off and the market start to settle.
“As we begin to hopefully get a view of what life will look like past the peak of the pandemic, and a sense of “normality” returns, more needs to be done to address the shortfall in property supply which continues to push up both house prices and rental fees. However, with the government’s new Planning Bill aiming to spark a surge in regional housebuilding, there may be increased opportunities for hopeful first-time buyers within the next few years. Specialist lenders can play a key role in supporting home-buyers’ property aspirations as we expect there to be more demand for flexibility post pandemic, to meet borrowers’ evolving circumstances.”
