RICS market survey confirms subdued start to the year for UK housing market

The residential property market in the UK has seen a slow start to the year with sales, new instructions and enquiries all falling, according to the latest market survey.

There is not much optimism in the near term, according to the report from the Royal Institution of Chartered Surveyors (RICS), with survey contributors saying that there is little prospect of a turnaround.

RICS says that concerns over the potential impact of Brexit, alongside affordability constraints continue to cause buyers and sellers to hesitate. However, expectations at the 12 month horizon are modestly positive.

During January, new buyer enquiries fell again at the headline level marking the sixth successive monthly decline and demand declined to some degree across virtually all parts of the UK. Scotland was a slight exception, but even there the trend was only flat.

Alongside weakening demand, the number of new properties being listed on the sales market also deteriorated, with the net balance reading of -25% the weakest since July 2016 and agreed sales also fell further, with the pace of decline seemingly gathering momentum compared to December.

Sales expectations for the coming three months remain downbeat, both at the national level and across most parts of the UK with expectations negative in 11 of the 12 regions/countries covered. The outlook over the next 12 months is stronger, however, as a headline net balance of +16% of contributors are expecting sales to rise.

Prices also continued to slip, as the headline price indicator declined for the fourth month in succession, with the net balance easing to -22%. When broken down, London and the South East continue to display the weakest readings, followed by East Anglia and the South West. In these regions the strong price growth over the past six years has left affordability looking stretched, with the high prices a key factor hampering demand. Elsewhere, prices continue to rise in Northern Ireland and Scotland.

The report also shows that across the lettings market, tenant demand rose modestly in the three months to January and has now picked up in each of the last three quarters.

Nevertheless, nationally new landlord instructions continue to dwindle, remaining in negative territory for an eleventh successive quarter. Respondents expect rents to rise by roughly 2% over the next 12 months, and at the five year horizon, averaging 3% each year.

‘Although some contributors to the survey have taken comfort from a better start to the year than anticipated, a larger proportion are continuing to find the market a difficult one in which to do business,’ said Simon Rubinsohn, RICS chief economist.

‘Resolution of the Brexit negotiations is widely seen as critical to encouraging potential buyers back into the market, although whether that will be sufficient in London and parts of the South East where affordability remains stretched and the tax changes are most penal remains to be seen,’ he pointed out.

‘Meanwhile, the lettings market is continuing to see instructions fall away as investors respond to the emerging fiscal and regulatory landscape. This is resulting in feedback consistent with further increases in rents across the country, to a greater or lesser degree, over the next 12 months,’ he added.