The July 2017 Residential Market Survey from the Royal Institution of Chartered Surveyors (RICS) shows that house price growth is grinding to a halt at the national level.
However, the organisation does note that regional patterns once again display a mixed picture. Alongside this, sales activity continues to lack momentum, with the number of new buyer enquiries and agreed sales remaining slightly down.
For now at least, the expectations of the country’s surveyors suggest that this subdued backdrop is unlikely to change significantly.
The average house price growth level slipped from +7% to just +1% in July, suggesting that prices were unchanged over the period. This is the softest reading since early 2013.
Nevertheless, this national figure conceals diverging trends across parts of the UK. Indeed, house prices remain quite firmly on an upward trend in some locations, led by Northern Ireland, the West Midlands and the South West.
In contrast, prices continue to drop in London, with the rate of decline broadly matching that of the previous three months. At the same time, house prices in the South East fell further, recording the weakest level of growth for this region since 2011.
Looking ahead, near-term price expectations continue to signal a flat trend over the coming three months. Over the next 12 months, 28% of surveyors expect to see a rise in prices, although this is the lowest reading since last July. Again, London continues to see the most cautious 12-month projections relative to all other parts of the UK.
Sales prices vs. asking prices
In an extra question included in July’s survey, respondents were asked to compare sales prices to asking prices over the past two months.
Nationally, for homes marketed at more than £1m, 68% of surveyors reported sales prices coming in below asking prices, with 33% responding in the up to 5% below category, and 26% answering between 5% to 10% below.
For homes listed at between £0.5m and £1m, a combined 57% of contributors noted that sales prices were coming in lower than asking prices, with the most popular answer being up to 5% below (37%).
Finally, for homes marketed at less than £0.5m, the largest share of respondents (49%) said that sales and asking prices were at the same level, although a still substantial 37% stated that sales prices were under.
Housing market activity
New buyer enquiries were very slightly down in July compared with the previous month, by 4%. This extends a trend of which buyer demand has failed to see any meaningful growth going back to November 2016.
In line with this, newly agreed sales dropped again (although only marginally), meaning that this indicator has now been negative for five consecutive months. That said, reasonable growth in property transactions has been seen in the South West over the last two months.
A sustained deterioration in the flow of fresh property listings coming onto the market continues to hamper activity, with new instructions dwindling for the 17th consecutive month in July.
Consequently, average stock levels on estate agents’ books remain close to record lows, limiting choice for potential buyers. The lack of stock is once again a dominant theme mentioned by surveyors to be holding back the market (with political uncertainty also cited frequently).
Going forward, respondents are not anticipating activity in the sales market to gain impetus at this point in time, with both three and 12-month expectations virtually flat. Notwithstanding this, the outlook seems a little more positive for some parts of the UK.
In the private rental sector, the quarterly (seasonally adjusted) figures are also consistent with a somewhat subdued picture.
Indeed, although tenant demand continued to edge higher, it did so at the slowest quarterly pace going back almost 20 years.
Meanwhile, landlord instructions declined, with 8% more surveyors noting a drop (rather than a rise) in listings.
Rent price expectations are now only very modestly positive for the coming three months. Over the next 12 months, rents are projected to increase by a little under 2% across the UK. Expectations remain firmer for the coming five years, with surveyors forecasting rent price growth to average just over 3% per year.
The Managing Director of West One Loans, Stephen Wasserman, comments on the latest survey: “Political and economic upheaval, alongside the ongoing supply versus demand issue, is continuing to plague the property market, damping buyer and investor demand. Despite today’s figures painting another downcast picture of activity, the housing market is resilient, and we’re optimistic that while we may continue to see a few stutters in due course, the overall market will grow in time.
“The bridging sector in particular has been flourishing in recent months, as those looking to capitalise on quick sales can do so with the flexibility and speed that this unique type of financing offers, and we expect this trend to continue.”
The RICS’ June 2017 report can be read here: https://landlordnews.co.uk/uncertainty-housing-market-sentiment/