Written By Em

The latest Residential Market Survey from the Royal Institution of Chartered Surveyors (RICS), for February 2018, provides little sign of any material shift in sentiment amongst respondents, at least as far as the headline figures show. Critically, indicators to future property market activity for the whole of the country remain subdued.

For example, the RICS New Buyer Enquiries series, which is a good indicator of Bank of England mortgage approvals, fell for the 11^th month in a row, by 16%. Meanwhile, the Newly Agreed Sales net balance, which leads official transaction data, dropped by 17%.

This would appear to suggest that the Government’s attempt to breathe fresh life into property market activity, through abolishing Stamp Duty for the majority of first time buyers in last year’s Autumn Budget, is not having a significant impact on overall housing demand.

Alongside ongoing concerns about affordability in some parts of the country, part of the problem may lie in the lack of choice of property to purchase, with the RICS’s New Instruction indicator dropping once again, and by the biggest margin on a seasonally adjusted basis (by 24%) since May last year. This has pushed the average level of stock on agents’ books (per branch) to a new record low of just under 42.

Property Market Activity Continues to Weaken

For the time being, respondents remain more sanguine about the medium-term prospects for transactions, with the 12-month RICS Sales Expectations series in positive territory for the fourth consecutive month, and at its best level since February 2017.

Whether this improvement can be sustained will, in part, depend on whether more housing supply comes onto the market. One reason for caution is provided by the number of valuation appraisals being undertaken at present; in February, 15% more respondents indicated that this was lower (rather than higher), compared to the same month last year.

In another sign of increasingly challenging market conditions, the average time for a sale to complete (from listing) has continued to edge upwards. This series was introduced in the RICS survey at the beginning of 2017, when it typically took around 16-and-a-half weeks for the whole process to complete. This has since climbed to around 18-and-a-half weeks.

Unsurprisingly, there is a regional dimension to the property market activity results, with RICS’s New Buyer Enquiries figures (taking a three-month average) continuing to rise in Scotland, Northern Ireland, Yorkshire and the Humber, and the north. The most negative results were in the East Midlands, London and the South East, with the trend in most other regions broadly flat.

Meanwhile, the national RICS Price Balance measure came in at zero. This is the ninth month in a row that the reading for this series has been recorded at somewhere between zero and 9%, pointing to very little change in house prices over the coming months.

The near-term RICS Price Expectations indicator (for the next three months) tells a broadly similar story, although there is, as with sales, a suggestion that prices could resume an upward course a little further out; the 12-month Price Expectations net balance was slightly higher than in January, at 39%.

The disaggregated price data also shows stark regional variations, with the price readings particularly strong in Wales, the North West, Northern Ireland and the East Midlands. By way of contrast, feedback on prices remains negative to a greater or lesser degree in London, the East of England, South East and the north.

In an additional question included in the survey, respondents were asked about the key factors driving demand for new build homes. At the national level, the main driver appears to be the lack of stock in the second-hand market. This is followed by the appeal of the Help to Buy scheme, with developer incentives and the quality of new homes scoring more lowly. The one region where the results are slightly different is London; the shortage of stock is viewed as a major influence, but Help to Buy is considered even more important.

The longer-term indicators for house and rent prices (over the next five years) continue to suggest that the former will increase at a slightly slower pace than the latter, although, in both cases, they point to growth of around 15%, which would suggest an acceleration towards the end of this period, given other readings from the study.

Russell Quirk, the Founder and CEO of hybrid estate agent Emoov.co.uk, comments on the report: “It’s important to note that only a tiny proportion of RICS members are actually estate agents, and so their views aren’t entirely typical of the overall industry.

“The market has certainly slowed to an extent, but, while some are noticing a reduction in buyer enquiries, their experience isn’t completely representative of the wider market. Halifax reported yesterday that UK home sales exceeded 100,000 transactions for the 13^th consecutive month and there was a notable uplift in mortgage approvals, so there is definitely still a big appetite for UK property.”

He continues: “We, for one, have recorded a consistent level of buyer demand across the last year, so perhaps talking the market down is easier to stomach for the average traditional agent while they continue to lose market share as the industry evolves.

“A dwindling index of stock alongside sustained buyer interest suggests the market is in better health than many are giving it credit for. Properties simply aren’t staying on the market for long and this interest, coupled with low supply, will see prices remain on their upward curve as the market continues to favour UK home sellers, not buyers.”

Yesterday, Theresa May announced new initiatives to ease the UK’s housing crisis, but industry experts are questioning whether the measures go far enough.

The Prime Minister said that young people without family wealth are “right to be angry” at not being able to buy a home.

Announcing reforms to planning rules in England, May said that homeownership was largely unaffordable to those not backed by “the bank of mum and dad”. This disparity is entrenching social inequality and “exacerbating divisions between generations”, she added.

The Labour Party responded to May’s announcements, saying that she should be embarrassed by the “feeble” measures proposed.

The Shadow Housing Minister, John Healey, reacted: “This housing crisis is made in Downing Street. It’s time the Tories changed course, and backed Labour’s long-term plan to build the genuinely affordable homes.”

In her speech at the National Planning Conference, May said that the existing National Planning Policy Framework will be overhauled, pending a consultation, with up to 80 proposals first put forward last year being implemented.

The new, key measures are:

• 10% of homes on major sites should be available for affordable homeownership
• Builders should be more open about affordable housing commitments at the planning stage
• Councils will have to adopt a new nationwide standard showing housing need in their area
• Infrastructure needs to be considered at the pre-planning stage
• Councils must consider revoking planning permission after two years if building has not started
• Ancient woodland and aged trees will get specific protection

A separate review, due to be finished later this year, will look at creating a new automatic right for homeowners to extend upwards and to make it easier to develop agricultural land for housing.

Do Theresa May’s New Housing Measures Go Far Enough?

May said that the cost of housing, both for homeownership and rent, was reinforcing economic divisions and leading to growing social immobility, with public sector workers unable to take jobs in certain parts of the country.

She explained: “The result is a vicious circle from which most people can only escape with help from the bank of mum and dad.

“Talking to voters during last year’s election campaign, it was clear that many people, particularly younger people, are angry about this. Angry that, regardless of how hard they work, they won’t be able to buy a place of their own. Angry when they’re forced to hand more and more of their wages to a landlord to whom their home is simply a business asset.”

She added: “They’re right to be angry.”

Although the number of planning permissions being granted in England has risen since 2010, the Prime Minister said that this has not been matched by a corresponding rise in the number of homes being built.

She pointed the finger of blame partly at developers, who she said have a “perverse” financial incentive to hoard land once it has been approved for development, rather than actually build on it.

May also insisted that “tearing up” the green belt was not the answer to the UK’s housing crisis and that existing protections would be maintained, and, in some cases, strengthened.

Councils will only be able to amend green belt boundaries if they can prove that they have fully explored every other reasonable option for building the homes that their communities need.

The Local Government Association said that it was wrong to blame councils, as they were approving nine out of ten proposed developments, and yet more than 420,000 homes with permission were still waiting to be built.

Its Chair, Lord Porter, insisted: “No one can live in a planning permission.

“Developers need to get on with building affordable homes with the needed infrastructure, and councils need greater powers to act where housebuilding has stalled.”

The Institute for Economic Affairs, a free market think tank, said that the Prime Minister was only “tinkering at the edges” of what was needed to boost the supply of new homes, while the Joseph Rowntree Foundation claimed that the “speech overlooked entirely the role central Government must play… private developers and local authorities cannot do this alone”.

Housing charity Shelter said that May was right to close “loopholes” being used by developers to reduce affordable housing levels.

In her speech, the Prime Minister stated that homelessness was a “source of national shame” and that £1 billion was being spent to halve rough sleeping.

The Chief Executive of NAEA Propertymark (the National Association of Estate Agents), Mark Hayward, comments on the new measures: “Clearly we need more houses and we welcome these announcements from the Government, however, given the nature of housebuilding, we need to recognise that it will inevitably be a slow process before people feel that they have more homes available to them.

“Our monthly housing market report showed demand for housing boomed in January, creating competition among buyers and causing the number of sales to first time buyers to drop. It looks like those trying to get their first foot on the property ladder are in for tough year.”

Lindsay Judge, the Senior Policy Analyst at the Resolution Foundation, also responds: “The Prime Minister is absolutely right to identify housing as a core living standards concern for 21^st century Britain. She is also right to call for change from local government, as well as from the housebuilding industry, to help address that challenge. But housebuilders are not the only people with a duty to build. The Government needs to have a far more direct role in housebuilding to hit its target of building 300,000 homes a year.

“On private renting, it’s time for action, not just discussion. Many households, including a growing number of families with children, will have to rent for years to come. Too many spend a significant amount of their income on rent, often in return for a poor quality home with a relatively short-term rental agreement. Making longer-term tenancies the norm would be a huge step in the right direction for those young people and low to middle income families who look set to rent for a large part, if not all, of their lives.”

Do you believe that May’s proposed new measures go far enough to tackle the country’s housing crisis?