Outlook for property prices turned negative again in July

Some of the improvement seen in near term expectations for property sales and prices have partially reversed, with the outlook for prices turning negative again, according to the latest residential survey

Buyer enquiries increase marginally for the second consecutive month in July although sales remained flat, says the residential market survey from the Royal Institution of Chartered Surveyors (RICS).

It also shows that landlord instructions continued to fall across lettings market as near term rent expectations increased, adding that falling supply in the lettings market seems likely to squeeze rents higher.

Near term rental growth expectations were driven up, with the headline net balance of +25% in July representing the most elevated reading over 12 quarters.

Some 8% more respondents saw a rise rather than fall in enquiries from new buyers in July, the second month running that has seen a small increase, mirrored across most UK regions.

While buyers seem to be picking up, newly agreed sales have in fact slipped. Indeed, the national net balance slipped to -6%, from +3% in June. Some areas did see a stronger sales trend, in a slightly mixed regional picture, with respondents across the North East and the West Midlands in particular reporting a reasonably solid pick-up during July.

Looking at the picture ahead, near term predicted sales are flat, with a net balance of -2%, down from +6% in June. What’s more, sentiment is now only modestly positive regarding the twelve month outlook, at the national level.

Again, while new buyer enquiries are picking up slightly, new instructions to sell were unchanged for the second successive report. This follows a string of 11 consecutive monthly declines in fresh listings. It seems there is little prospect of a sustained rise in supply coming onto the market in the immediate future, the report says.

Price wise, the headline price indicator pulled back into negative territory in July, with the national net balance falling to -9%, having edged up to -1% in June. Regionally, prices were seen to be rising at a solid pace in Northern Ireland, Scotland and Wales. But, prices continue to fall in London, the South East and East Anglia.

Back at the national level, feedback from contributors is still suggesting that higher priced tiers of the market are facing a more challenging environment. Some 69% of respondents note that, for properties marketed at over £1 million, sales prices are coming in below asking prices, up from 66% in April.

However, for properties listed at up to £500,000 and below, 59% of survey participants report sales prices have been at least level with asking, albeit this is slightly down on 62% three months ago.

When it comes to the outlook for prices, near term expectations deteriorated over the month, but at the 12 month horizon, projections remain marginally positive in net balance terms.

‘The latest RICS results will provide little comfort for the market with all the key indicators pretty much flat lining. Indeed, the forward looking metrics on prices and sales also seem to losing momentum as concerns, clearly voiced in the anecdotal feedback, both about Brexit and political uncertainty heighten,’ said Simon Rubinsohn, RICS chief economist.

‘Some support may be provided by an easing in the cost of money which could feed through into lower mortgage finance costs, but this may be insufficient to provide a spur to lift activity given the clouds hanging over the economy,’ he explained.

‘Meanwhile, the lettings market data continues to send a very strong message that institutions need to upscale their build to rent pipeline to address the shortfall resulting from the decline in appetite from buy to let investors. It is significant that the near-term rental expectations indicator has climbed to a three year high,’ he added.