The latest RICS UK Residential Survey has found that sentiment across the UK housing market deteriorated sharply in March.
In terms of new buyer demand, a run of three successive monthly increases was brought to an abrupt end, with a net balance of -74% of respondents across the UK as a whole reporting a fall in enquiries during March. Likewise, the uptick in sales volumes that had been seen since December 2019 went into reverse, evidenced by a headline net balance of -69% of survey participants noting a decline over the month. Unsurprisingly, sales fell across all parts of the UK when compared with February.
Looking ahead, near term sales expectations are of course deeply negative following the government’s lockdown measures, with the latest net balance of -92% representing the weakest figure since the inception of this series back in 1998. At the 12 month horizon, sales expectations are a little less downbeat, albeit a still sizeable net balance of -42% of contributors expect sales to be down over the year ahead.
New instructions being listed on the market for sale also dropped back sharply, with a net balance of -72% of contributors reporting a fall over the survey period.
In keeping with this, inventory levels slipped noticeably during March, hitting a fresh record low of 40 properties, on average, per branch.
The survey’s headline indicator on prices (which captures changes over the past three months) remained slightly positive in the latest results. In fact, a net balance of +11% of contributors saw prices increase in the three months to March, although this reading has eased from +29% in February. When disaggregated, Northern Ireland, Scotland and the South West of England have recorded the strongest growth (in net balance terms) over the last three months.
That said, prices are not likely to continue on their recent upward trajectory for much longer. Indeed, the survey’s indicator capturing near term price expectations sunk from a net balance of +21% in February, to post a figure of -82% in March. With regards to the 12 month view, price expectations are somewhat less negative, as a net balance of -38% of respondents envisage house prices falling over the year to come (this is down from a positive net balance of +71% in February however).
RICS said it is interesting to note that sentiment on the medium term outlook for prices has proved a lot more resilient. Respondents currently expect price growth to average just over 2.5%, per annum, over the next five years. This remains closely aligned with the average five-year house price inflation projections seen over the past 12 months.
In the lettings market, tenant demand was more or less stable in the three months to March (non-seasonally adjusted series). Alongside this, landlord instructions fell once more, with a net balance of -32% of contributors noting a decline. Again, the virus outbreak has had a significant negative influence on near term rental growth projections, which slipped into negative territory during March. While rents are now seen stagnating over the next 12 months, medium term projections have only been downgraded slightly compared to the February figures, with average annual growth of 2.5% anticipated through to 2025.
Gemma Harle, managing director of Quilter’s mortgage network, said: “With the nation under lockdown for the foreseeable future, it comes as little surprise to see the housing market begin to grind to a halt, with a net balance of -74% of respondents reporting a fall in buyer demand, as the Coronavirus crisis continues to generate severe uncertainty and significant economic disruption.
“What is concerning for the long-term outlook of the sector is that responses on future housing demand were negative for both the three and twelve-month time frame. It shows that the crisis has the potential to cast a long shadow on the economy for some time to come.
“However, it is important to remember that despite the disruption, the mortgage market is still active and many people will continue to be sitting on a lot of equity so we expect the need for advice to continue to support product transfers and remortgaging. The fluidity of the situation means that many will require sound advice whilst they grapple with their own financial situation and the options available to them in the mortgage market.
“The government has acted quickly to fight the immediate economic fire; but these figures show that many sectors, including the housing market, that did not immediately require financial assistance will begin to strain under the weight of the uncertainty in months to come and could be vulnerable without government support.”