UK housing market remains subdued with no impetus predicted in the near term

Activity in the UK residential property market remained flat in May and it is unlikely to gain any impetus in the near term, according to the latest monthly housing market survey.

Although the number of homes coming on to the housing market turned positive for the first time since 2016, buyer demand continues to decline at a headline level but to a lesser extent than at the start of 2018, says the report from the Royal Institution of Chartered Surveyors (RICS).

Overall, the market saw a stable trend in new instructions in May, with the headline indicator turning positive for the first time in more than two years but average stock levels on estate agents books across the UK was steady at 42.5, which is still close to an all-time low.

The report says that it remains to be seen whether the increase in May truly marks the beginning of supply pressures easing.

When contributors were asked to compare appraisals that were undertaken in May with the same period last year, 18% more stated they were lower on a like for like basis. This does not appear to bode particularly well for the pipeline going forward, the report points out.

Looking at demand from buyers, while the number of new enquiries fell overall, the decline was modest in comparison to the beginning of the year. The report adds that the regional picture is still incredibly mixed with six out of the 12 regions covered in the survey seeing an increase over the month.

Demand from new buyers was reported to have increased in London, the South West, Yorkshire and Humber, West Midlands, Scotland and Northern Ireland.

The regional picture also remains mixed in terms of agreed sales. Although sales held steady for the second successive month at the headline level, with the least negative reading for 14 months, the regional breakdown suggests that activity is rising firmly in just four regions.

Sales increased in the West and East Midlands, Scotland and Northern Ireland, but were either flat or negative across the rest of the UK. Looking ahead, respondents expect little change over the coming months at the national level.

Prices were unchanged in May with a net balance -3% following a marginal decline in April. However, as with the other indicators, there are large regional dimensions to this headline figure. London continues to show the most negative trends, with downwards movement also seen across the wider South East.

Notably, after nearly three years of solid price growth, momentum also appears to have slipped across the South West, as the price balance remained in negative territory for the second month in a row. By way of contrast, house prices continue to rise in the Midlands, North West, Wales, Northern Ireland and Scotland.

Near term price expectations point to a marginal decline on a UK wide basis, with the net balance coming in at -9%. That said, this is mainly driven by a negative outlook for prices across the south of England.
In the lettings market, demand for rented properties remained unchanged on a non-seasonally adjusted basis, extending a run of five consecutive reports where respondents have reported flat tenant demand.

Alongside this, landlord instructions remain in decline. Given the lack of supply, rents are envisaged to increase further at the national level over the year ahead, the report says.

‘Although agents are suggesting that a little more supply may have come onto the market in May, some of it from the buy to let sector, inventory levels still remain near historic lows,’ said Simon Rubinsohn, RICS chief economist .

‘Indeed, with the run rate on appraisals continuing to track below the numbers of a year ago it is premature to conclude that a sustained upturn in available stock is imminent. Against this backdrop, it is likely that the headline picture regarding activity in the housing market will remain subdued for some months to come. This is reflected in the feedback to the latest survey which shows sales expectations only marginally positive on a one year view,’ he added.