RICS: house sales reach 16 month high

House sales picked up across the UK in September, supported by a modest improvement in the availability of mortgage finance, according to the latest RICS Residential Market Survey.

Related topics:  Finance News
Rozi Jones
8th October 2015
house growth graph this is actually the green one

Across the UK, agreed sales rose at the quickest pace since May 2014, with 14% more chartered surveyors seeing a rise. This is a 16 month high and the fifth consecutive month that sales have increased.

The North, East Anglia and Scotland posted the sharpest rises in activity over the month with the East Midlands the only region to see a material drop in sales albeit following an increase in the region in August.

The stronger sales trend in the UK is broadly reflective of an upturn in demand which has been visible in the data since the early spring. Indeed, the number of new buyer enquiries rose for a sixth consecutive month across the country with 18% more chartered surveyors reporting a rise in demand.

The pattern being seen by chartered surveyors echoes recent lending data including that highlighted by the Bank of England, showing mortgage approvals at an eighteen month high and up 12% compared to a year ago.

As the availability of mortgage finance appears to be improving, the average ‘perceived’ LTV ratio captured by respondents to our survey edged up to 79.3% with first time buyers seeing credit conditions relax most noticeably over the month.

Although activity is picking up, the ongoing lack of new instructions and the resulting limited stock on the market continue to be an issue for the sustainability of the market. The number of new instructions has fallen in thirteen of the last fourteen months.

Significantly, 40% of respondents feel the biggest factor behind the negative trend in new instructions is the lack of stock already for sale which is deterring would be movers as they struggle to find a suitable property to move on to. The next most cited influence was economic uncertainty, followed by stretched affordability.

Simon Rubinsohn, RICS Chief Economist, said:

"Activity is now picking up which is encouraging, but unless the stock being sold is replenished there is a limit to how sustainable this modest improvement in market turnover will prove to be. And, unfortunately, the indications are that we are locked in a cycle where the lack of available properties on agents’ books is itself deterring some potential vendors from thinking about putting their own property on the market.

"Against this backdrop, it is hard not to see prices continuing to move higher over the coming months and into the early part of 2016, notwithstanding the present concerns regarding the affordability of housing in some areas of the UK that are being highlighted by respondents."

Brian Murphy, head of lending at Mortgage Advice Bureau, commented:

“As consumer demand holds strong, housing transactions have risen to their quickest pace in eighteen months. Although house prices are still rising, they are doing so at a far more moderate pace compared to last year, and more than two thirds of respondents to the RICS survey agree prices are at or below fair value.  Combine this with record low mortgage rates and significantly improved product availability and it’s no surprise there has been a pick-up in housing activity.

“However, the market is not without its hurdles – the deficiency of available homes still threatens to derail recent progress. The number of new property listings has now fallen for thirteen of the past fourteen months, with a lack of stock cited as the main deterrent for would-be movers. A healthy housing market has movement all the way up the property chain, and this trend threatens to cause a logjam that will make it harder for first-time buyers to become homeowners.

“The creation of new homes is a clear priority for both industry and government, and it is encouraging to see the Conservative Party pledging to do more to increase levels of homeownership at this week’s Party conference. However, the 200,000 starter homes pledged must be in addition to current housebuilding levels if it is to make any discernible difference. The Government must also involve lenders in its discussions to create an effective long-term housebuilding strategy.”

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