UK property market remains subdued with sales down for 16 months in a row

Sales activity in the UK housing market remains subdued and the trend is likely to continue as a slight improvement in supply is expected to be short lived, according to the latest residential market survey.

Newly agreed sales keep on falling and have done so for 16 months in a row, according to the June survey from the Royal Institution of Chartered Surveyors (RTCS) with 7% more respondents reporting a fall in agreed sales.

The number people looking to buy remained flat in June, prolonging the trend which dates back to late 2016. RICS says that this is likely to persist through the second half of the year with the time taken to complete a sale edging up from around 16 weeks in the Spring of 2017 to around 18 weeks at present.

Meanwhile, the new buyer enquiries series, which provides a gauge as to the appetite to acquire property, showing little reason to expect any uplift.

For the second month in a row, new instructions have risen, with 10% more respondents seeing an increase in the flow of properties being put up for sale. However, with average stocks remaining close to historic lows at 43 it would be too early to suggest that this issue is lessening as an obstacle, the survey report says.

The survey has in the past highlighted a lack of available second hand stock as a key impediment to the efficient functioning of the market, and the pipeline looks unlikely to improve with new appraisals of property by valuers down on the same period last year.

Looking ahead, sales expectations are mildly positive for the coming three months, but at the twelve month point chartered surveyors are more cautious, with the net balance slipping to zero for the first time since last October.

The lack of activity on the sales side also continues to impact prices. At the headline level they remain flat in June, and it is the thirteenth consecutive month that chartered surveyors have reported a sluggish picture, with respondents not anticipating much change in the coming three months either.

They survey also shows that not enough rental property supply is driving up rents. New instructions coming through to agents has dropped again and has done so for 21 months in a row.

RICS reports that anecdotal remarks draw attention to role the change in tax treatment on investment property has played in driving this trend. The rent expectations series is pointing to a cumulative average rise of around 15% over the course of the next five years.

‘It is hard to see what is going to provide much impetus for activity in the housing market in the near term. Meanwhile the on-going challenges around lifting the delivery pipeline, reflected in last week’s disappointing data on housing starts, is captured in the suspicion in the survey that prices are likely to resume an upward course over the coming year,’ said Simon Rubinshohn, RICS chief economist.

‘The challenge is also visible in the response of the private lettings market to change to the tax treatment on investment properties. While it is understandable that the Government wanted to provide a lift for first time buyers, this may well come at the cost of higher rents as the appeal of buy to let diminishes,’ he added.

According to Alan Collett, fund manager at Hearthstone Investments, it should be noted that despite the market being subdued, house prices remain resilient at a national level. ‘We sold a property last month having received an offer at the asking price within a week, illustrating that, although it might be a challenging time for buyers, the current restricted choice in parts of the housing market is providing opportunities for sellers,’ he pointed out.

‘At a regional level house prices remain mixed, with higher value properties in London seeing downward pressure on price, while more modestly priced homes in the Midlands and Northern regions are experiencing rising valuations. We also continue to see high demand for well-managed modern private rental homes across the UK and recently let out four newly purchased houses within two weeks of marketing beginning,’ he said.

‘Regardless of Brexit uncertainties, demand for private rental properties continues to grow across the UK, yet there is a chronic under supply of quality housing available making residential property an attractive investment for long term investors,’ he added.