The September 2017 RICS’ UK Residential Market Survey has reported that demand and sales both slipped deeper into negative territory, with this subdued picture anticipated to persist over the coming months.
Feedback from RICS contributors suggests the recent shift in interest rate expectations may be contributing to the more cautious tone in market sentiment. The headline price net balance held steady in September, again returning a fgure of +6%. This measure is consistent with a very marginal increase in prices nationally.
When disaggregated, the price gauge for London remains frmly negative, while the price balance was also negative in the South East for a fourth consecutive month (albeit to a lesser extent than in the capital). Both of these regions continue to display the highest proportion of respondents viewing the market to be overpriced, compared to all other parts of the UK. Elsewhere, East Anglia and the North East also posted modestly negative readings for house price infation.
Away from these areas, price growth remains relatively robust across the rest of the UK, with Wales, the North West of England, Scotland and Northern Ireland all seeing prices rise over the period. In terms of the outlook for house prices, three month expectations are now modestly negative at the national level, with the net balance standing at -8% (down from -2% last time).
Particularly cautious sentiment in London, along with the South East, continues to weigh on the headline figure. Northern Ireland and Scotland are now the only two areas in which contributors are confdent that prices will rise meaningfully over the near term. Nevertheless, further out, at the 12 month horizon, respondents do expect prices to increase in all areas, with London the sole exception. In the capital, 12 month expectations are now more downbeat than at any other point since this series was introduced in 2010.
Focussing on activity, new buyer enquiries declined during September, as a net balance of -20% more respondents noted a fall in demand (as opposed to an increase). Not only does this extend a sequence of negative readings into a sixth month, it also represents the weakest fgure since July 2016.
Meanwhile, new instructions to sell were more or less stable for the second report running, having declined continuously over the past 18 months. Consequently, average stock levels on estate agents’ books held broadly steady (albeit near record lows), at 43.3.At the same time, headline agreed sales volumes also fell, returning a net balance of -15%. Again, this was the softest reading since last July (during the aftermath of the EU referendum).
When broken down, although London and the South East were at the forefront of the decline once more, weakness in transactions was widespread during September. In fact, only Wales and the South West were cited to have seen an increase over the month, while all other parts of the UK exhibited either a fat or negative trend. Given the sluggish backdrop, the average time taken from listing to completion across the UK lengthened to 18 weeks (from 17), according to the latest results.
Going forward, little change is anticipated in terms of national sales activity over the coming three months, with the expectations series slipping to -1% from +7% previously.
Likewise, the 12 month outlook is also fat at the national level, although respondents are a little more optimistic in Wales, Scotland and Northern Ireland.Looking at the lettings market, interest from prospective tenants edged up during September (non seasonally adjusted), with 10% more respondents noting a rise, rather than a fall, in demand.
Landlord instructions declined alongside this, meaning listings have not seen any growth going back fourteen months. Rental expectations are somewhat subdued in the near term, with contributors anticipating only a marginal rise on a UK-wide basis.
Over the next 12 months, respondents are pencilling in a rise of around 2% in rents nationally. Conversely, contributors in London still see rents coming under further downward pressure over the year ahead, although all other parts of the UK display positive projections.
Richard Sexton, director at e.surv, said: “The figures released today by RICS look very familiar, and similar to the last couple of months, as overall market activity has continued to remain flat. However, if we consider these findings on a regional basis, we are increasingly seeing a diverging picture in both growth and sentiment. Away from London and the South East, the mood is generally more optimistic.
“Our recent data shows over a third of loan approvals were granted to first-time buyers in Yorkshire and Northern Ireland, which should be seen as an encouraging sign for those looking to step onto the property ladder in this region.
“However, if we step back and look at the wider picture, it’s apparent that overall market activity is not growing in part due to a shortage of stock coming onto the market. Whilst the government’s recent announcement of an additional £10 billion investment into the Help to Buy scheme is welcomed, this does not alleviate the supply side of the issue.
“We need the government to work more closely with developers to build more affordable housing, quickly and effectively. As we await the Autumn Statement next month, we hope to see genuine solutions to this long-running problem.”
