RICS : Lack of choice for new buyers hampering UK housing market as sales decline
According to the RICS survey, momentum is continuing to ebb in the UK housing market as sales dip slightly and buyer interest remains flat in April.
The results show that new instructions continue to drop. Anecdotal evidence cites a lack of choice, uncertainty due to the calling of an early election and the ramifications of stamp duty changes as factors hampering activity.
The lack of choice for would-be buyers across the UK is still a key issue and in April new instructions remained negative for a fourteenth month in a row at the national level, leaving average properties on estate agents books hovering close to record lows. 15% more respondents saw new instructions drop in April, and perhaps consequently, new buyer enquiries were unchanged nationally having failed to see any meaningful growth since November 2016. During April, a net balance of 4% of respondents saw a fall in new buyer enquiries.
Alongside stagnant buyer demand, respondents reported agreed sales were beginning to slip slightly following a number of months of flat transactions. Overall 9% more respondents saw a drop in sales over the month (from -3%), which is the weakest reading since the aftermath of the referendum.
Looking ahead, the flat picture for sales at the national level is expected to continue over the next three months as 3% more respondents expect to see a rise in sales over the time period. Expectations have moderated in virtually all areas of the UK when compared to the March survey. However, the twelve-month outlook is more optimistic with 31% more respondents anticipating a pick-up in sales over the year ahead at the national level.
Despite the subdued backdrop, 22% more respondents saw prices rising in April, (unchanged from March), underpinned by the lack of stock. As such, house prices continue to rise nationally, with the pace of growth steady over the last five months, although there is variation across the UK. In Central London, the indicator on prices has been in negative territory for 13 months. In addition, price growth has eased noticeably in in East Anglia recently and, along with the North East, was not seen to have seen any increase in April. At the other end of the scale, in the North West 67% more respondents noted higher (rather than lower) prices in April with the reading having been above 50% in this part of the country in each of the last seven months.
Looking ahead at the national picture for near-term price expectations, these have eased slightly with the net balance moderating to +4% (from +11%) suggesting that house price inflation is anticipated to slow in the three months ahead. Notwithstanding this, the twelve-month expectations predict that all parts of the UK will see growth in house prices.
In the lettings market, the quarterly data shows tenant demand rising moderately, although momentum does appear to have faded over the past six months. At the same time, landlord instructions were relatively flat leading respondents to expect further modest rental growth at the national level.
“Although the picture clearly does vary across the country, the bulk of the feedback we are receiving points to a fairly flat summer for both activity and prices. Lack of stock on the market remains a key challenge for the sector with recent and forthcoming tax changes having a material impact on transaction levels, particularly at higher price points. Uncertainty relating to the forthcoming general election is also highlighted by some respondents as a reason for inertia.”
“It is noticeable that the amount of new rental instructions coming through to agents is continuing to edge lower, which is not altogether surprising given the changing landscape for buy-to-let investors. One consequence of this is that rents are expected to continue rising not just in the near term but also further out and at a faster pace than house prices.” said Simon Rubinsohn, RICS Chief Economist.