The UK housing market continues to lack impetus, with new buyer enquiries and agreed sales stagnant in March, the latest housing market report shows.
The number of properties coming on to the market also dropped further and predictions for sales growth in the year ahead have now fallen, according to the report from the Royal Institution of Chartered Surveyors (RICS).
As well as new buyer enquiries and sales remaining flat in March, stock levels hit new record low as the number of properties coming to market continued to decline and overall while house price rises are strong in the North West, they continue to slip in central London.
It means that new buyer enquiries have now been flat for a third successive month and although the picture remains mixed across the UK, the areas with declining buyer interest outweigh those with increasing demand.
The strongest growth in new buyer enquiries was seen in Northern Ireland and the South West, plus 34 and 22 net balances respectively and in London buyer interest has been increasing modestly over the last four months to a plus nine net balance in March.
New instructions to sell fell noticeably with 13% more respondents seeing a fall in fresh listing rather than a rise over the month. Stock on estate agents books has consequently dipped to a new record low with branches, on average, now holding only 43 unsold properties.
RICS says that consequently there has been an impact on sales activity with transaction volumes failing to rise across the UK in each of the last four surveys. In March, 3% more respondents saw a fall in agreed sales rather than a rise. However, sales did rise relatively firmly in Wales, Scotland and Northern Ireland.
The lack of supply in the market continues to underpin prices, with 22% more respondents seeing a rise over the last month across the UK, however, the difference between central London and the rest of the UK continues to widen. If figures from the capital are excluded from the headline figure, price growth in the UK has accelerated since December and price rises in the North West are particularly strong.
Prices in central London have progressively deteriorated and at -49%, the net balance was the weakest since 2009. Nevertheless, 14% more respondents from London anticipate prices will be higher in 12 months’ time.
Further ahead, sales expectations over the next 12 months were reduced with 24% more respondents predicting a rise, down from 37% in February. Moreover, expectations for year ahead sales growth were reduced in eight of the 12 UK regions covered.
In the lettings market, tenant demand continued to rise as 11% more respondents noted an increase rather than a fall on a non-seasonally adjusted basis. Even so, demand growth remains more modest than in March 2016.
New landlord instructions also remain in negative territory for a sixth straight month, and the imbalance between supply and demand continues to drive rents upwards. Contributors anticipate further growth in rents in virtually all areas over the next twelve months with the exception of the capital, where rents are anticipated to continue to decline over the near term.
‘The latest results for our survey show little change in the underlying picture surrounding both sales and markets. High end sale properties in central London remain under pressure, while the wider residential market continues to be underpinned by a lack of stock. This includes rents, which away from the capital are generally moving higher as demand outstrips supply, said Simon Rubinsohn, RICS chief economist.
‘For the time being it is hard to see any major impetus for change in the market, something also being reflected in the flat trend in transaction levels,’ he added.
It is frustrating to see that the market dipped slightly last month, according to Richard Sexton, director at e.surv. ‘Transactions have remained flat for a while now, in part due to a lack of affordable housing for first time buyers, which has led many people to continue renting or move back in with their parents in order to save for a deposit,’ he said.
‘The issue of affordability continues to plague the sector, and the wider economic uncertainty we have experienced recently has only added to this, causing more buyers to adopt a more cautious approach and hold off making big decisions until certainty returns,’ he pointed out.
But he believes that the figures are unsurprising given the current state of the housing market. ‘We urge the Government to start working closely with the industry to meet its target of 250,000 homes being built this year and give more people the opportunity to own their own home,’ he added.
However, Robert Grigg, managing director of property finance at the Hampshire Trust Bank, expects a fall in the near future in property prices due to the cyclical nature of the housing market. ‘Looking to the future, our biggest concern will be how smaller housebuilders will fare when the market begins to contract,’ he said.
‘We know the Government has highlighted the need for better support for smaller housebuilders as they hold the key to fixing the UK’s broken housing market. Therefore as Brexit negotiations get underway, we need to ensure these firms stay high on the agenda as their contribution to the long-term success of the UK economy is vital,’ he added.
