Shortage of stock continuing to drive up house prices: RICS

A continued shortage of new properties being listed for sale, despite a rise in new buyer enquiries, is preventing a pick-up in sales volumes and driving up house prices, according to the latest RICS survey.

Related topics:  Finance News
Rozi Jones
20th January 2022
House sale sign sold
"Although respondents to the latest survey continue to highlight a lack of stock on the market, they do encouragingly still see some scope for transaction volumes to edge upwards over the coming months."

In a trend that has ran over much of the second half of 2021, the number of new listings again failed to keep up with demand over the Christmas period, leading to agreed sales dropping and underpinning house price rises.

In December, 9% more respondents reported a rise in the number of new buyers looking for a property, the fourth consecutive increase. Whilst the growth is modest this month, respondents also cited a decline in new listings coming to their books, a major factor to the drop in newly agreed sales.

This imbalance between demand and supply is currently underpinning growth in house prices. In December, 69% more respondents reported a rise in house prices, and 67% anticipate prices to rise further over the coming year.

Simon Rubinsohn, RICS chief economist, commented: “Despite the termination of the stamp duty break at end of September and the more recent increase in interest rates, the RICS new buyer enquiries indicator remained in positive territory into the year end. Although respondents to the latest survey continue to highlight a lack of stock on the market, they do encouragingly still see some scope for transaction volumes to edge upwards over the coming months.

“More of a concern is the suggestion that the mismatch between demand and supply will drive house prices even higher through the course of 2022. Rents similarly seem likely to be on an upward course over the next twelve months despite more broader cost of living challenges emerging on the back of higher energy costs. And significantly, the longer-term metrics capturing five-year expectations suggests the industry for now continues to anticipate prices and rents outpacing wage growth beyond the end of this year in the absence of a major uplift in new supply.”

Tomer Aboody, director of Finance, added: "As we headed towards the end of last year, it was the same old story that had prevailed for many months and continues today – lack of stock, which is inevitably pushing up property prices. If there are several buyers (or more) competing for a property, it stands to reason that this will lead to a higher sale price. Cheap mortgages have helped buyers push themselves to afford that property with more space.

"While rising property prices is only good news for homeowners who aren’t moving, the lack of pick-up in transactions is more worrying. Mobility is essential, whether that’s getting on the ladder for the first time, moving up it to buy a bigger home in which to raise a family, moving across the country for work or downsizing when you no longer need that big family home. The inability to do these things stops the market from functioning effectively and until a solution is found, such as removing stamp duty for downsizers, it is hard to see this situation changing."

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