UK property market remains subdued but growth expected in next year

Residential property sales remained subdued in September and buyer demand and supply slipped into negative territory, the latest industry housing market survey shows.

New instructions across the UK reached its weakest in three years and buyer enquiries have fallen as uncertainty deters house purchases, according to the report from the Royal Institution of Chartered Surveyors (RICS) but it still expects prices to rise at a national level over the next year.

It says that much of the anecdotal commentary from the survey respondents working in the market blames heightened economic and political uncertainty and the market seems unlikely to gain impetus over the next three months, though sentiment for a year ahead is more resilient.

In September, following three consecutive months of a stable trend, a decline is reported in home listings coming on to the housing market. Comments from contributors are suggesting that the Brexit impasse is dissuading vendors. The new instructions net balance fell to -37% in September, the weakest reading since June 2016.

Average stock levels on estate agents’ books, unsurprisingly therefore, remain near record lows. As contributors are reporting that appraisals are down compared to a year earlier, there is little prospect of a pick-up in the immediate future.

Alongside this, a more cautious approach from buyers is visible in the September results. After holding steady in the last four months, the new buyer enquiries net balance fell to -15%. In keeping with this, newly agreed sales fell, with a net balance of -27%, from -11% previously, with activity reportedly slipping in virtually all parts of the UK.

As far as the near-term outlook is concerned, sales expectations stand at -9%, suggesting sales will remain subdued in the coming three months.

The headline price balance sees a flat trend in house price inflation. However, there is once again a mixed picture across the UK with negative momentum in London and the South East, and solid gains in Northern Ireland, Scotland and the North West.

Looking ahead, price expectations for the coming three months stand at -16% pointing to a modest decline on a UK wide basis. However, the 12 month outlook points to a turnaround, with 18% more respondents expecting prices to rise rather than fall over the coming year.

In the lettings market, the latest set of results see demand from prospective tenants rising firmly for an eighth month in a row. Alongside this, landlord instructions remain in decline. With demand still outstripping supply, rent expectations for the coming three months remain positive at a net balance of 24%.

‘There are good reasons for thinking the latest dip in both buyer enquiries and vendor instructions is a response to the endless wrangling about Brexit, as the October 31st deadline approaches,’ said Simon Rubinsohn, RICS chief economist.

‘Indeed, much of the commentary from respondents based further away from London and the South East remains relatively sanguine, which is also reflected in some of the metrics capturing expectations. However, unless there is a speedy resolution to the ongoing impasse it does seem inevitable that the stand-off between purchasers and sellers will deepen making it harder to complete transactions,’ he explained.

‘This will not only be a direct hit on the housing market itself but could have ramifications for the wider economy as the normal spend on furniture, fittings and appliances that typically accompanies a house move is also put on hold,’ he added.