Lack of choice having a serious impact on UK housing market

A lack of choice for buyers is hampering the UK housing market with the latest analysis showing that sales are falling and interest is flat.

Overall new instructions continue to drop with the lack of supply, possibly made worse by the forthcoming general election, a key issue for the housing market, according to the April survey report from the Royal Institution of Chartered Surveyors (RICS).

It says that 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 and new instructions have now been negative fourteen months in a row at the national level.

This means that the number of properties on estate agents books are hovering close to record lows as 15% more respondents saw new instructions drop in April while 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 and alongside stagnant buyer demand, respondents reported agreed sales were beginning to slip slightly following a number of months of flat transactions. Some 9% more respondents saw a drop in sales over the month which is the weakest reading since the aftermath of the European Union referendum almost a year ago.

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 12 month outlook is more optimistic with 31% more respondents anticipating a pick-up in sales over the year ahead at the national level and despite the subdued backdrop, 22% more respondents saw prices rising in April, unchanged from March, underpinned by the lack of stock.

The report points out that 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 some 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 12 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,’ said Simon Rubinsohn, RICS chief economist.

‘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,’ he added.