The UK residential property market continued to lack momentum in September as demand from new buyers and sales fell again, according to the latest research.
The shift in interest rate expectations has to buyer caution in a slowing market although prices are remaining positive, although the market in London and the South East is weaker, says the monthly report from the Royal Institution of Chartered Surveyors (RICS).
Expectations point to a subdued near term outlook for both prices and sales and a lack of new buyers is causing a fall in sales with surveyors reported a decline in both. It means that sentiment is now flatter than any point since last year’s European Union referendum result.
The data shows that in September some 20% more respondents noted a fall rather than rise in demand from would be buyers, extending the run of negative readings into a sixth month.
Alongside this, 15% more respondents reported a fall in agreed sales rather than a rise which is the lowest since July 2016.
When broken down regionally, London and the South East were at the forefront of the decline in sales, but weakness in transactions was widespread during September. In fact, only Wales and the South West were cited to have seen an increase in sales, while all other parts of the UK saw sales flat
Looking ahead over the next three months, there is little change anticipated in national sales activity, with expectations slipping to -1% from +7% previously. Likewise, the 12 month outlook is also flat at the national level, although respondents are a little more optimistic in Wales, Scotland and Northern Ireland.
As sales and new buyers decline, new instructions to sell were more or less stable for the second report running, having declined continuously for the past eighteen months. Consequently, average stock levels on estate agents’ books held broadly steady, albeit near record lows, at 43.3.
Prices also held steady in September at the national level, with 6% more respondents seeing a rise in prices demonstrating a marginal increase. Looking across the regions, London remains firmly negative, while the price balance in the South East also remains negative, but to a lesser extent than London, for a fourth consecutive month. 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.
Moving away from the capital, East Anglia and the North East also saw prices fall in September with the rest of the UK continuing to see house prices rise. Looking ahead to the next three months, sentiment turned negative with 8% more respondents expecting prices to fall at a national level, primarily being driven by the cautious outlook from respondents in London and the South East.
The report points out that Northern Ireland and Scotland are now the only two areas in which contributors are confident that prices will rise in the near term. Despite some regional discrepancies for the coming quarter, respondents expect prices to rise, in all regions apart from London, by this point in 2018.
Looking at the lettings market, interest from prospective tenants edged up during September 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.
‘It was always questionable to talk about the housing market as a single entity but the stark divergence in key readings from the latest RICS survey demonstrates in the clearest possible terms just how important the regional narrative is at the present time,’ said Simon Rubinsohn, RICS chief economist.
‘In part, this is a reflection of affordability constraints hitting the higher priced segments of the market. It is perhaps also indicative of a shift in economic momentum in the face of the increasing possibility of the first hike in base rates in over ten years,’ he explained.
‘That said, we are continuing to see evidence of shortage of stock both in the new build and second-hand market. And despite the announcements at the recent Conservative Party conference, it is hard to envisage this changing any time soon. Against such a backdrop, prices in general are likely to remain elevated and indeed, as the survey indicates, continues to rise over the medium term in most parts of the country,’ he added.
According to Richard Sexton, director at chartered surveyors e.surv, the mood away from London and the South East is indeed 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,’ he said.
‘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,’ he pointed out.
‘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,’ he concluded.
