Sales slowing down in the UK’s housing market as challenges continue
Demand from new buyers nationally in the UK has weakened slightly for the second successive month, making the outlook for sales more pessimistic, according to the latest survey from surveyors.
The housing market continues to face challenges from affordability constraints, a lack of homes for sale, economic uncertainty and concerns about forthcoming interest rate rises, says the September monthly report from the Royal Institution of Chartered Surveyors (RICS).
Looking at new buyer demand, enquiries slipped again during September, with the net balance falling to -11% from -9% in August. Having remained relatively stable over the four months prior, recent results appear to be pointing to a renewed decline in new buyer enquiries.
At the same time, the volume of new sales instructions coming to the market also deteriorated for a second month running. This leaves average stock levels on estate agents’ books close to record low levels, with limited choice likely one factor hampering demand,’ according to the survey.
In another sign of a housing market struggling for momentum, the time taken to complete a sale from initial listing has increased to approximately 19 weeks. This represents the longest duration since the series was introduced back in February 2017. In terms of sales volumes, the newly agreed sales net balance remained slightly negative across the UK as a whole, moving to -9% from -13% in the previous report.
Regionally, the sales trend is flat to slightly negative in virtually all parts of the country. Northern Ireland and Wales were the only areas reported to have seen a rise in sales during September. Even so, this growth was relatively modest.
Looking ahead, at the national level, near term sales expectations slipped for a fourth consecutive report, and further out, over the next twelve months, sales expectations have now also turned negative on a UK wide basis. Again, respondents across Northern Ireland remain most optimistic with regards to the sales outlook, while, those in the South East are now the most cautious.
House prices remained more or less unchanged at the national level in September, as the headline price net balance inched down to -2%, compared with a reading of 1% in August. This is the fifth month where respondents, nationally, have reported little change in house prices.
That said, the report says that with a lack of affordability in parts of the country remaining a key challenge, the subdued sales picture in these areas is still placing downward pressure on prices.
Respondents in London continue to report the steepest fall in house prices on a regional comparison, whilst the South East and East Anglia deteriorated a little further in September. Elsewhere house prices continue to rise firmly, with the West Midlands, Northern Ireland and Scotland posting the strongest growth.
‘There are a number of themes running through the comments of respondents this month but uncertainty relating to Brexit negotiations is at the very top of the list followed by references to the confidential remarks made by the Bank of England Governor to the cabinet. All of this is not surprisingly taking its toll on the sales market with the key activity indicator in the survey flat or slightly negative in all parts of the country apart from Northern Ireland and Wales,’ said Simon Rubinsohn, RICS chief economist.
‘That said, the recent announcement from the Prime Minister that the Housing Revenue Account borrowing cap will be abolished is a bold move which over the time could help address some of the very real challenges facing those looking to buy or rent property. There is no silver bullet that will immediately resolve this problem but encouraging new entrants to deliver affordable homes is certainly part of the answer,’ he added.
The survey also shows that in the national lettings market, tenant demand rose for the fourth successive month but instructions to let remain in decline, with the survey’s series for landlord listings having been stuck in negative territory since October 2016.
Rental projections for the year ahead point to growth of just over 2%, with this rate anticipated to accelerate, averaging around 3.5% per annum, over the next five years.
In London, tenant demand has staged a sustained recovery over recent months, increasingly outstripping supply. Although rents are still anticipated to see little change in the near term, five year expectations point to stronger rental growth.
Russel Quirk, chief executive of Emoov, believes that while Brexit jitters are having an effect, there is also a refusal by many to accept current market conditions and adjust their sale price expectations. But he expects prices to continue to creep up due to a shortage of supply.
Meanwhile, the lack of supply is slowing down the housing market, according to Craig McKinlay, new business director at Kensington Mortgages. He believes supply issues are discouraging home owners from downsizing and in turn, preventing suitable properties being freed up for first time buyers or second steppers.
‘With the Budget a few weeks away, it would be great to see the government offer incentives for older homeowners to downsize, for example an exemption from Stamp Duty. There has been a lot of focus on first time buyers, quite rightly but unless the Government can make it financially worthwhile for current home owners to move, then the bottleneck will only continue to be squeezed,’ he added.