House prices rose once again in May, and at a quicker pace than in April, as the stock of homes per UK surveyor fell to a record low since the data series began in January 1978, according to the latest RICS UK Residential Market Survey.
While 34% more surveyors saw prices rise in May (the same month in which the Nationwide Building Society estimated that the average price of a home in the UK has now climbed to £195,000), supply to the market declined for the fourth consecutive month with 19% more surveyors reporting a drop in new instructions.
Despite the rise in new buyer enquiries, which increased from a net balance of 4% in April to 18% in May, many respondents to the survey expressed some surprise at the lack of ‘post-election bounce’ in fresh supply following the unexpectedly decisive outcome to the poll. The North West and London saw the sharpest drop in instructions compared with April. Furthermore, UK-wide listings have now failed to see any meaningful growth since the middle of 2013.
Additionally, although respondents’ reported a slight improvement in credit conditions with higher perceived loan to value ratios on mortgages to first time buyers and existing home owners, the average number of newly agreed sales per surveyor rose only very marginally to 19 (down from 23 in May 2014 and up from 18.9 in April 2015).
At a regional/country level, unbalanced price growth continues to be particularly marked across the market. Surveyors reported the highest price growth over the last three months in the North West, Northern Ireland, East Anglia and the South West, but alongside this, London is now seeing a slight turnaround, following seven consecutive months in which the net balance for prices was in negative territory, it has now been positive for two months in succession.
In the lettings market, tenant demand continued to increase in May (on a non-seasonally adjusted basis) extending an ninterrupted run of demand growth into a fifth straight month and respondents’ anticipate rents will rise across all parts of the UK over the next three months, with expectations most elevated in the East Midlands and the South West.
Simon Rubinsohn, RICS chief economist, said: “There had been some hope that the removal of political uncertainty would encourage more properties onto the market but the initial indications are that this is not proving to be the case. As a result, it is hardly surprising that prices across much of the country are continuing to be squeezed higher with property set to become ever more unaffordable.
“Indeed the feedback we are getting in the survey, which points to prices at a headline rising by another 25% over the next five years, suggests that there is no real confidence that the measures necessary to deliver a meaningful boost to new supply will be put in place anytime soon. Significantly, away from the South East, the strongest price growth is anticipated in the North West which is envisaged to benefit economically from the focus of the government on developing the ‘Northern Powerhouse’ centered on this area.”
