UK property market unchanged in May but marginal improvement is not ruled out

There was little change in the housing market in the UK in May but an improvement in sales is expected soon as negative trends appear to be easing, according to the latest residential survey report.

Agreed sales, prices and new instructions all showed some signs of improvement and although sales expectations over the next three months are downbeat, a marginal boost is expected over the year ahead, the latest report from the Royal Institution of Chartered Surveyors suggests.

It points out that lack of stock is still an issue in the market with stock on agents’ books hitting a new low and even with the new instructions to sell net balance the least negative since September last year, the feedback on appraisals being conducted at the present time provides little grounds for concluding that supply is about to pick-up.

With regards to house prices, 10% more respondents saw a fall rather than rise in May, compared to the April net balance figure of -22 This would indicate a deceleration in the pace of price declines and the report explains that this indicator typically has a six-month lead over actual measures of house price inflation.

The regional breakdown shows the South East now showing the weakest sentiment on price movements, as London appears to bounce back a little.

In the lettings market, tenant demand increased slightly for a fifth month in a row and at the same time landlord instructions declined, which has been a persistent theme over much of the past three years.

RICS says that, given this imbalance, near term rental expectations are now more elevated than at any other point since May 2016, with rents seen rising across the UK. The report says this could also be partly to do with changes in the rental market with regard to fees, but that remains to be seen.

Simon Rubinsohn, RICS chief economist, pointed out that much of the anecdotal insight provided by respondents is still quite cautious, reflecting concerns about both the underlying political and economic climate.

‘Another significant point made by respondents is that there continues to be considerable emphasis on the need for realistic pricing on the part of vendors, which while not a new story, is indicative of the ongoing challenges,’ he said.

‘Meanwhile the lettings numbers are a source for some concern with rental expectations beginning to accelerate. It remains to be seen whether the pick-up indicated in our data materialises but the deterioration in the net return for landlords certainly provides a reason why, as it is a possible outcome of recent changes in the tax treatment of buy to let investments,’ he added.