Homebuyer demand picks up according RICS

The Royal Institution of Chartered Surveyors has reported that for the first time since February, new buyer enquiries have increased, albeit modestly.

Related topics:  Finance News
Warren Lewis
13th October 2016
house growth graph this is actually the green one
"Despite a broadly positive outlook on a national level, continually falling prices in the capital reflect the uncertainty in our capital’s financial services industry since the referendum"

The new report highlighted that new instructions to sell slipped further, with the lack of supply firmly underpinning prices at the headline level. What's more, price expectations rose at the three and twelve month horizons, although both indicators remain softer when compared to the start of the year.

The national price indicator crept higher in the latest results, with a net balance of +17% of respondents noting an increase in prices (up from +13% in August). This measure has now risen in two consecutive reports having moderated for five months in a row between February and July. The regional breakdown shows prices continue to fall in Central London and the North East, although the pace of decline eased noticeably across the latter. Elsewhere, most other parts of the UK saw prices climb higher over the month.

Looking ahead, near term price expectations continued to recover gradually at the headline level, with the national series posting the strongest net balance since March. Conversely, three month price expectations slipped back into negative territory across London, after registering a broadly neutral reading in the previous report. Anecdotal evidence suggests that uncertainty following the EU vote, along with Stamp Duty changes, are both continuing to adversely impact the top end of the market in particular. At the twelve month horizon, the net balance data shows prices in the capital are expected to see little change, making London the only area in which prices are not projected to rise over the year ahead (this again largely reflects the picture in central areas and the higher end of the market).

Back at the headline level, new buyer enquiries increased for the first time in seven months, with a net balance of +8% more respondents reporting a pick-up in demand (rather than a decrease). This measure improved from -5% (revised from an initial figure of -7%) previously and has shown a significant turnaround relative to June, when a balance of -34% was posted. Nevertheless, the headline figure masks considerable variation across the UK, with some agents seeing a more stable trend in demand emerging as opposed to any recovery just yet.

Alongside this, new sales instructions fell once more, marking the seventh straight month in which new listings have declined. In fact, with the exception of a few months around the turn of the year, the flow of new stock coming to market has dwindled continuously over the past two years. As such, average stock levels on estate agents books remain exceptionally low. Consequently, the imbalance between marginally increasing demand and a real lack of supply is firmly underpinning prices. In addition, the lack of choice for would-be purchasers also appears to be restricting overall sales market activity.

Indeed, nationally, agreed sales were broadly unchanged for a second month running having declined sharply from May through to July. The regional picture remains mixed however, as transactions rose in six of the twelve regions/countries covered in the survey and fell across the remainder. Going forward, respondents' optimism towards the sales outlook improved, with growth expected across most parts of the UK over the next three months. Further out, over the next twelve months, contributors are projecting sales to pick-up firmly in all areas.

On a UK-wide basis, a majority of 59% of respondents feel house prices are around fair value at present, although 37% do feel their local market is overpriced to some extent. The regional breakdown shows over 60% of contributors in both the South East and London sense house prices to be above fair value currently. Within this, over 20% of London respondents feel prices are 'very expensive' relative to fundamentals. Nevertheless, this proportion has remained broadly stable over the past six months. Northern Ireland (89%), along with Scotland (83%), currently exhibit the highest share of contributors who deem residential property in their local market to offer good value.

In the lettings sector, tenant demand increased firmly during September (non-seasonally adjusted figures), with the reading signalling the strongest rate of growth in twelve months. Landlord instructions were more or less unchanged at the headline level, but did increase notably in London and Wales. London remains the only area in which rents are expected to come under pressure in the near term, while virtually all other areas are anticipated to chalk up solid gains.

Andy Sommerville, Director of Search Acumen, comments: “Residential market sentiments this September show that house prices across Britain have risen for the second month in a row and the storm in the housing market is settling. Enquiries from buyers have picked up for the first time since February, representing an increase in national demand as confidence seemingly grows. In addition, when looking ahead we see that house price expectations for the three and twelve month horizons have received a new lease of life after a post-Brexit chill.”

Despite a broadly positive outlook on a national level, continually falling prices in the capital reflect the uncertainty in our capital’s financial services industry since the referendum. Expectations of a pick-up in inflation due to the recent blows to the pound will not help the unaffordability of homes in the city whilst RICS forecast further drops in supply.”

Looking forward to the Autumn Statement, the property sector anticipates the announcement of measures to boost home-building in Phillip Hammond’s first Budget statement. Tackling the growing gap between housing supply and demand will protect our market and allow ‘business as usual’ whilst we await more clarity on our relationship with a fragmented European Union.”

More like this
Latest from Property Reporter
Latest from Protection Reporter
CLOSE
Subscribe
to our newsletter

Join a community of over 30,000 intermediaries and keep up-to-date with industry news and upcoming events via our newsletter.