House price inflation dropped further in June, along with a decline in sales, new buyer enquiries and new buyer instructions, the latest residential market report shows.
Price growth has lost its momentum across the country and activity indicators point to flat sales trend continuing over the coming months, according to the report from the Royal Institution of Chartered Surveyors (RICS).
The overall trend is being reflect in medium term sales expectations with the 12 month indicator, while still positive, down to its lowest level since the aftermath of the vote to leave the European Union just over a year ago.
The report shows that average stock on surveyors’ books hit a new low in June 2017, highlighting ongoing supply shortage.
Looking at price inflation, some 7% of surveyors saw a rise rather than fall in prices at the headline level, down from a net balance of 17% in May and the lowest reading since July 2016. However, this trend is not wholly reflected across the country.
In central London the pace of decline in house price inflation continues, with 45% more respondents seeing a decline in prices over the month, while the South East and East Anglia are showing a flatter trend.
By way of contrast, in Northern Ireland 41% more surveyors saw a rise in prices rather than a fall in June and in Wales 38% more respondents saw a rise rather than fall in prices over the month.
The West Midlands and the North West are also regions where prices continue to rise and reported net balances of 33% and 28% respectively.
Respondents once again saw a decline in newly agreed sales in June, with 5% more respondents seeing a fall in sales over the month. This decline is the fourth consecutive negative reading and reflects both the lack of stock coming on to the market and a more cautious stance from buyers over recent months.
Newly agreed sales are predicted to remain broadly stable over the next three months but the 12 month sales expectations indicator reading, while still pointing to an increase in activity, has slipped to its lowest level since the immediate aftermath of the referendum at net balance of 12%.
Significantly for future activity, new instructions fell again and for the sixteenth month in a row, with 19% more respondents seeing a fall rather than rise in property coming on to the market. Against this backdrop, average stock levels have slipped to a new low.
The survey included additional questions to gather further insight regarding the generally flat trend in activity being seen. At a national level, 44% of contributors identified domestic political uncertainty as the biggest factor explaining the current state of the market.
This compares to 27% who highlighted Brexit as the most important factor influencing the picture. Significantly, most parts of the UK apart from the capital showed a fairly similar pattern to the headline numbers. However, in London Brexit and the changes in stamp duty were all equally citied as contributing to the lethargy.
‘The latest results demonstrate the danger, however tempting, of talking about a single housing market across the country. RICS indicators particularly regarding the price trend are pointing towards an increasingly divergent picture,’ said Simon Rubinsohn, RICS chief economist.
‘High end prime properties may be seeing prices slipping back but, for good or ill, prices are continuing to move higher in many other segments of the market. Indeed, the disaggregated data suggests that this will continue to be the case over the coming months,’ he pointed out.
‘Perhaps not surprisingly in the current environment, the term uncertainty is featuring more heavily in the feedback we are receiving from professionals working in the sector. This seems to be exerting itself on transaction levels which are flat lining and may continue to do so for a while particularly given ongoing challenge presented by the low level of stock on the market,’ he added.
However, according to Andy Sommerville, director at Search Acumen, four straight months of decline in newly agreed sales doesn’t reflect a negative sentiment in the market. ‘People want to buy. We just have a chronic shortage of housing and the Government is failing to provide the antidote,’ he said.
‘Fundamentally, the housing market is not broken, it just needs action rather than words. We must provide our house builders with the resource required to revive the market, finally addressing the deepening crevasse between supply and demand, offering a glimmer of opportunity to our first time buyers,’ he added.
Jeremy Duncombe, director of the Legal & General Mortgage Club, is also optimistic. ‘Overall sentiment within the RICS survey has remained quite pessimistic over the last few months and today’s outlook of a dip in house prices and market activity is not surprising. Yet when compared to the wider economic and political landscape, the housing market has continued to amaze many. It has remained consistently robust, despite everything we have seen over the last 12 to 18 months,’ he said.
‘The Northern hotspots of Manchester, Leeds and Birmingham are continuing to see strong price growth and first time buyers levels are up by 10% year on year, nearly doubling from the market low in 2009. A flattening in London is also not necessarily a bad thing, as the North/South divide begins to even out,’ he explained.
‘However, today’s results still highlight the growing issue of our country’s housing supply. The dust has now settled from the general election and it is vital that efforts are focused on building more homes in order to re-balance supply and demand,’ he added.
